09/03/26
Hormuz halt forces Opec+ producers to curb crude output
Hormuz halt forces Opec+ producers to curb crude output
Dubai, 9 March (Argus) — Saudi Arabia, the UAE and Bahrain have joined Iraq and
Kuwait in curbing crude output, as the near-halt in tanker traffic through the
strait of Hormuz cuts Opec+'s Mideast Gulf producers off from their main export
route and leaves storage space rapidly diminishing. The five countries have been
forced to reduce production as logistics constraints limit their ability to move
crude to international markets, taking an estimated 6.2mn–6.9mn b/d of regional
supply offline, according to Argus calculations based on February production
levels. Saudi Arabia has begun cutting production by shutting several offshore
fields in response to security threats from Iranian missile and drone attacks on
Gulf energy infrastructure, sources with knowledge of the matter told Argus .
The kingdom has closed the Safaniya, Marjan, Zuluf and Abu Safa fields,
curtailing an estimated 2mn–2.5mn b/d. Saudi Arabia produced 10.88mn b/d in
February, while supply to markets averaged 10.1mn b/d, Argus estimates show.
State-controlled Aramco began offering Asia-Pacific customers the option to load
crude at the Red Sea port of Yanbu from 3 March, using the 7mn b/d east-west
pipeline as an alternative to shipments through Hormuz. Riyadh is not yet
exporting at those volumes from Yanbu. Iraq's oil ministry said last week that
production was being cut. A source familiar with the matter said today that Iraq
"loaded its last export tanker yesterday". Production is being redirected to
domestic refineries, which are ramping up runs. Iraq produced 4.42mn b/d in
February, but output had already fallen to 1.5mn–1.7mn b/d by 8 March and is
expected to decline further to 1.2mn–1.3mn b/d, the source said. Excess refined
products will be placed into storage, although those facilities are expected to
fill rapidly if exports through the strait remain blocked. Iraq's export options
have been further constrained by the closure of the pipeline that carries crude
from the north of the country to Turkey's Ceyhan port. The pipeline has shut for
a second time since the US–Iran war broke out, port agents said. Before the most
recent closure, pumping of heavy sour Kirkuk crude averaged around 50,000 b/d,
roughly a quarter of normal flows. Kuwait has also begun cutting output after
exports were effectively halted by the conflict. State-owned KPC said on 7 March
that it had started to reduce crude production and refinery runs, and had
declared force majeure for crude and refined product exports. Kuwait's output
has already fallen to around 2mn b/d, down from 2.59mn b/d in February, and
could "very soon" drop to around 1.5mn b/d as refinery runs are lowered further,
a third source said. Kuwait's refineries have combined capacity of 1.615mn b/d
but are operating at around 50pc utilisation. The country has stopped loading
crude onto tankers, the source added. In the UAE, state-owned Adnoc said on 7
March that operations continue despite the escalating conflict and shipping
disruption. But "as a responsible operator, Adnoc is carefully managing offshore
production levels to address storage requirements," the company said. Adnoc
continues to load crude from ports inside Hormuz, tracking data show. But a
fourth source estimated UAE production had fallen to 2.7mn–3mn b/d, down from
3.53mn b/d in February. The UAE can bypass Hormuz via the Adcop pipeline, which
is currently estimated to be carrying 1.7mn–1.8mn b/d, above its nameplate
capacity of 1.5mn b/d. Adnoc can also divert crude into domestic refining at the
Ruwais complex, which can process close to 1mn b/d. In Bahrain, state-owned
Bapco Energies declared force majeure today after its 405,000 b/d Sitra refinery
was hit in an attack. Taken together, the disruptions amount to roughly
6.2mn–6.9mn b/d of shut-in supply, based on Argus' February production
estimates. The war, now in its second week, has left most commercial shipping
unable to transit the strait of Hormuz, with only limited Iranian movements
continuing. The paralysis has triggered a sharp rally in crude prices, with Ice
Brent climbing above $100/bl on Monday in one of the largest single-day gains on
record as markets price in the loss of Mideast Gulf supply. By Bachar Halabi,
Nader Itayim and Aydin Calik Send comments and request more information at
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