Kuwait and the United Arab Emirates are the Gulf oil producers who will be next to reduce output if they cannot export crude through the Strait of Hormuz due to the Iran crisis, as storage tanks fill up, according to analysts, traders and sources.
Shipping through the Strait of Hormuz, a narrow chokepoint between Iran and Oman through which a fifth of the world’s crude oil and liquefied natural gas passes, has ground to a near halt after Iranian hits on six vessels since the crisis started.
Earlier this week, Iraqi oil officials told Reuters Iraq has cut oil production by nearly 1.5 million barrels a day, and those cuts could widen to more than 3 million bpd within days as the country runs out of storage and cannot export crude due to the crisis.
Kuwaiti national oil company KPC did not immediately respond to requests for comment on whether shutdowns were imminent. UAE oil producer ADNOC had no comment beyond its listed subsidiaries’ statements on Wednesday that said their operations were continuing normally.
CHOKEPOINT
Analysts at JPMorgan said in a report this week that Kuwait has about 18 days before output would need to be curtailed due to storage being used up, and the UAE 22 days if vessels are not re-routed, as estimated from the first day of the conflict.
Two oil traders who deal in UAE crude said Abu Dhabi may need to lower production earlier than this if exports through the Strait do not resume.
“At some point soon, everyone will also shut in if vessels do not come,” said a source with a state oil company in the region.
Around 300 oil tankers remained inside the Strait as vessel traffic in and out of the chokepoint nearly halted following the outbreak of war, according to ship tracking data from Vortexa and Kpler that excludes some of the smallest tankers.
(Reporting by Ahmad Ghaddar, Alex Lawler and Yousef Saba; Editing by Jan Harvey)
