Persian Gulf oil exports grind to halt as storage hits limit

Oil storage tanks throughout the Gulf are approaching capacity, effectively halting crude exports, according to energy experts.

Very few tankers are willing to navigate the critical Strait of Hormuz, bordered by Iran on one side, due to fears of attacks from Iranian drones or rockets, Caliber.Az reports, citing foreign media.

As storage facilities reach their limits, the likelihood of forced cuts in crude production is rising.

“Saudi Arabia, long considered the Gulf’s unshakeable (oil) shock absorber, faces forced output cuts within a week,” Rystad Energy, a research and analysis company, said in a note on March 5. Alongside Saudi Arabia, the Gulf states include Bahrain, Kuwait, Oman, Qatar, and the United Arab Emirates.

If the conflict continues, “triple-digit oil prices become a very real possibility,” Aditya Saraswat, a senior analyst at Rystad Energy, said in the note.

Brent crude, the global oil benchmark, is approaching $88 a barrel. “We could begin to see precautionary shutdowns across the region, which would have serious implications for global oil markets,” Saraswat added.

With storage buffers measured in days rather than months, Rystad Energy notes that for most Gulf producers, the question is not whether they will have to cut output but when.

Natasha Kaneva, J.P. Morgan’s head of global commodities strategy, also predicts that production curbs could expand quickly, estimating that each reduction of a million barrels per day could push the benchmark price up by $4.

On March 3, Reuters cited two Iraqi oil officials reporting that Iraq had already reduced oil production by nearly 1.5 million barrels per day, with cuts potentially exceeding 3 million barrels soon as storage fills and exports stall due to the conflict.

By Jeyhun Aghazada