US Hormuz Blockade Forces Iran to Cut Oil Output

U.S. Central Command’s blockade of maritime traffic at the Strait of Hormuz has reduced Iran’s crude exports by nearly 70%, forcing Tehran to cut production by roughly 2.5 million barrels per day and leaving only about 12 to 22 days of unused storage capacity.

The blockade began April 13 at 10 a.m. ET under a presidential proclamation. Shipping intelligence firm Kpler estimates exports fell from about 1.85 million barrels per day in March to roughly 567,000 bpd. Analysts report that tankers have not been able to transit past the blockade near the Strait of Hormuz.

With export routes constrained, Iran has limited options for crude it cannot send abroad. Kpler analysts estimate the country has between 12 and 22 days of open storage space. Goldman Sachs reported that Iran has already reduced production by about 2.5 million bpd and indicated storage pressure could force another reduction of roughly 1.5 million bpd by mid-May.

The disruption has affected other Gulf producers. Saudi Arabia, Iraq, Kuwait and the United Arab Emirates have also scaled back output since the conflict began on February 28. Goldman Sachs estimates total Persian Gulf production losses at about 14.5 million bpd and says global oil stockpiles were drawn down at a rate of roughly 11 to 12 million bpd through April.

Typical shipments to China take about two months to arrive, and buyers commonly take another two months to settle payments. That timing means Iran’s government and oil companies may not experience the full revenue shortfall for three to four months, even as storage capacity fills and production is curtailed.

If storage capacity is exhausted, operators would face the operational choice of shutting wells or closing facilities, which would further reduce output and could lead to fuel shortages inside Iran. Market participants are monitoring how continued cuts and constrained Gulf flows will affect global inventories and prices in the coming months.

The blockade has tightened physical supplies and increased pressure on exporting countries to manage storage and contractual obligations. Buyers and refiners must adjust to reduced and uncertain cargoes from the Gulf.