Blockade of the Strait of Hormuz: JPMorgan predicts complete halt to oil production within days
2 March 12:19
Major producers in the Middle East will maintain oil production for a maximum of 25 days if traffic through the Strait of Hormuz is completely halted.
This is according to an analysis by JPMorgan Chase & Co, as reported by "Komersant Ukrainian" with reference to Bloomberg.
“The seven major producers in the region (Saudi Arabia, UAE, Kuwait, Qatar, Oman, Iraq, and Iran – ed.) have a total onshore storage capacity of approximately 343 million barrels. This capacity means that if supplies are cut off, oil can only be stored for 22 days,” the report says.
About 60 empty tankers can provide another 50 million barrels, extending the total time before production stops to a maximum of 25 days.
“Once the threshold is exceeded, physical storage constraints will inevitably force producers to halt production,” JPMorgan notes.
Reduction in transit through the Strait of Hormuz
As of February 28, transit through the Strait of Hormuz had fallen to 4 million barrels per day, only a quarter of the normal level.
Following US and Israeli operations against Iran and Iranian attacks, ship owners have halted deliveries “on their own initiative” due to security concerns.
At the same time, JPMorgan writes that Saudi Arabia and the United Arab Emirates have pipelines to bypass the Strait of Hormuz and access alternative routes. Their capacity will be limited to achieve total exports of 19 million barrels per day.
Oil prices have jumped
It should be noted that the global fuel market is already in a state of turbulence. Oil prices recently reached a record high for the year amid declining production and geopolitical instability.
Regional leaders are already responding to the situation—India and Iran have raised prices for their own raw materials, which creates the conditions for further increases in energy prices worldwide.
