The company said Iran has had to cut back on its oil production because 25 customers who had agreed, before the recent OPEC split, to buy 1.2 million barrels of crude oil a day in 1977 are now taking only 693,000 barrels a day.

The customers had demanded lower prices, the company said but "since any discount would be against OPEC's decision, direct sales droped."

Iran's 1977 budget depends greatly on an expected $21 billion in oil income. A 10 per cent reduction for the year would cut sharply into the country's development and arms purchasing programs. Similar reductions could more seriously harm other OPEC countries.

Eleven of the 13 OPEC members, including Iran, decided last month to raise oil prices 10 per cent on Jan. 1 and 5 per cent on July 1. Saudi Arabia and the United Arab Emirates, who had opposed a major increase, said they would increase prices only 5 per cent and Saudi Arabia announced that it would step up production to undercut the prices of the other countries.

Oil industry sources said today that the United Arab Emirates has also decided to increase production, lifting its production ceiling from 1.5 million barrels a day to about 2 million barrels.

Oil officials in Kuwait said this week that demand for Kuwait's oil was also reduced, but there has been no indication whether Kuwait will eventually reduce production.

One Middle East oil expert predicted that all of the OPEC producers that adopted the higher increase "are clearly going to have to cut back on production as demand shifts to the lower-priced oil in Saudi Arabia and the Emirates."

Venezuelan Oil Minister Valentin Hernandez said today, however, that the 10 per cent increase in the price of Venezuelan oil had been accepted by the country's customers, including Exxon, which buys 800,000 barrels a day. As a result, Hernandez said, Venezuela does not intend to cut its production.

Hernandez predicted that Venezuela's oil income, which amounted to $5.5 billion last year, will increase by about $750 million during the first half of this year. About half of Venezuela's production is exported to the United States.

The record demand cited by Iran was attributed to customers that buy directly from the state-owned oil company.

Traditionally, the Iranian company has produced and marketed most of the country's oil through a 17-member consortium of international oil companies headed by British Petroleum, Shell and the U.S. majors.

Two years ago, Iran, complaining that the consortium companies were reluctant to invest heavily in increased production facilities in Iran, began developing a separate market, selling directly to smaller and independent companies.

By the second half of last year, 20 per cent of Iran's oil was being sold directly to these customers, bypassing the consortium.

The customers were not identified and there was no indication whether the consortium also was taking less Iranian oil.