Oil producers in the Middle East could likely sustain output for “no more than 25 days” if the Strait of Hormuz were to shut completely due to conflict in the region, according to analysts from JPMorgan Chase & Co.
“Beyond this point, storage constraints would force mandatory production shut-ins,” the analysts, including Natasha Kaneva, said in a note.
The US and Israel launched attacks on Iran over the weekend that were met with a retaliatory barrage of missiles aimed at several countries, including Qatar, the United Arab Emirates, Kuwait and Bahrain. US President Donald Trump said American forces will continue bombing Iran until his objectives have been achieved.
Tanker traffic through the Strait of Hormuz — a chokepoint off Iran’s coast through which roughly a fifth of the world’s oil and liquefied natural gas must pass — has effectively stalled due to a self-imposed pause by shipowners, though it has not been formally closed. Export flows via the route on Feb. 28 fell to around 4 million barrels of almost entirely Iranian crude, versus a typical daily rate of around four times that amount, JPMorgan said.
Around 19 million barrels a day of liquid fuel exports, including 16 million barrels a day of crude, transit the strait, the JPMorgan analysts wrote in a note dated March 1. While nations like Saudi Arabia and the UAE can send some oil via pipeline to alternative sea routes, volumes are limited, they wrote.
Across the seven Gulf producers – a group that also includes Iraq, Kuwait, Qatar, Oman and Iran itself – JPMorgan estimated roughly 343 million barrels of available onshore crude storage capacity, equivalent to 22 days of stranded production that could be stored. Additional storage options at sea could provide a further buffer, with around 60 empty tankers in the Gulf region that could absorb about 50 million barrels – extending operations by another three to four days.
