(March 10): Oil production cuts in the Middle East are deepening, shaving about 6% off global supply, as the Strait of Hormuz chokepoint remains at a near-standstill.
Four of the region’s giants — Saudi Arabia, Iraq, the United Arab Emirates and Kuwait — have lowered their collective output by as much as 6.7 million barrels a day, people with knowledge of the matter said, asking not to be identified discussing confidential information.
The war, which is now in its second week and has sucked in more than a dozen countries, has led to the effective closure of the region’s main export route, causing storage tanks to fill up and output to shrink.
“While we have faced disruptions in the past, this one by far is the biggest crisis the region’s oil and gas industry has faced,” Amin Nasser, the chief executive officer of Saudi Aramco, said during an earnings call.
The four nations’ cutbacks are the most tangible supply response yet the war started. It means they’ve have reduced their collective production by as much as a third.
The chaos and shutdowns drove oil toward US$120 a barrel on Monday, though prices tumbled back down again after US President Donald Trump suggested the war may end soon.
See also: Trump hints at early end to Iran war, easing oil-shock concerns
Saudi Arabia has lowered output by two million to 2.5 million barrels a day, the United Arab Emirates by 500,000 to 800,000 barrels a day, Kuwait by about half a million a day and Iraq by about 2.9 million a day, the people said.
“The disruption has caused a severe chain reaction in not only shipping and insurance but there’s also a drastic domino effect on aviation, agriculture, automotive and other industries,” Nasser said. “There would be catastrophic consequences for the world’s oil markets the longer the disruption goes on, and the more drastic the consequences for the global economy.”
He declined to comment on output levels on the call.
See also: Oil drops as Trump signals Iran conflict near end
Proportionately, Iraq has forced into the deepest cuts at almost 60%. Saudi Arabia’s, the UAE’s and Kuwait’s reductions all represent about 20% to 25% of their February output levels, according to data compiled by Bloomberg.
“With the current geopolitical crisis, global inventories, which are already at a five-year low, would see drawdowns at a faster rate,” Nasser said. “Global spare capacity is mostly concentrated in this region so it’s absolutely critical that shipping resumes in the Straits of Hormuz.”
Uploaded by Magessan Varatharaja
