Gulf oil producers could restore up to half of their offline output within two weeks if the Strait of Hormuz is reopened, the International Energy Agency said in its latest monthly market report. It also highlighted an oil supply collapse of more than 10 million barrels per day in March.
The Paris-based agency said that, even after the strait reopens, it would take about two months to re-establish steady exports, with initial volumes remaining below the levels recorded before the war began on February 28. Oil-laden tankers stranded in the Gulf would first need to exit before vessels waiting outside can enter to load and draw down stocks, the agency said.
Global oil supply fell by 9.4 per cent in March to 97 million bpd following Iranian attacks on Gulf energy infrastructure and disruption to exports through the strait, through which about a fifth of the world's oil supply normally flows. Opec+ production fell by 9.4 million bpd that month to 42.4 million bpd, while non-Opec+ supply declined by 770,000 bpd to 54.7 million bpd, the IEA said.
Among Opec producers that ship oil through the strait, Iraq sustained the deepest losses, with output plunging 66 per cent from 4.57 million bpd to 1.57 million bpd.
Saudi output decreased by 3.15 million bpd, marking a 30 per cent drop to 7.25 million bpd. Production fell despite Saudi Aramco rerouting supplies through the Red Sea using the East-West pipeline. Kuwait's production more than halved to 1.19 million bpd, while the UAE's output dropped 35 per cent to 2.37 million bpd.
Iran, which effectively closed the strait after the war began, was the sole exception. The IEA said its production remained largely flat at 3.63 million bpd.
The war is already “the greatest global energy security threat in history”, IEA executive director Fatih Birol said on Monday, a warning he first issued in March as the crisis escalated.
“The world is becoming a dangerous place,” he added on Monday, underscoring how energy is firmly at the centre of geopolitical risk.
He said more than 80 facilities have been damaged, including oilfields, refineries and terminals, during the Iran war. “Out of this 80-plus, more than a third are severely damaged.”
The IEA also estimated 50 per cent of the Gulf's upstream fields can return to pre-war levels within about two weeks, rising to 80 per cent around a month later.
Production disrupted
Iraq will continue to face challenges as it gets production back online. The IEA warned that port storage constraints would limit Baghdad's ability to resume exports until loading schedules are restored. This has been made harder by the dwindling number of tankers positioned outside the strait.
“Iraq is potentially the most severely affected among major producers,” the IEA said.
With limited storage at the country’s southern ports, production shutdowns started as early as March 2 at major fields, including South Rumaila, West Qurna-2 and Maysan.
With the country’s budget highly reliant on oil revenue and more than 90 per cent of exports blocked behind the strait, Iraq this month began exporting fuel oil through Syria in lorries. It also resumed oil exports from its Kirkuk fields to Turkey's Ceyhan port through a pipeline, following a deal with the Kurdistan Regional Government.
On Monday, Opec said output from its members fell by 7.88 million bpd, or 27 per cent, in March. That resulted in the biggest supply shock the group has experienced in decades.
