Oil crisis in the Middle East. The reservoirs are almost full, Kuwait is limiting production

Kuwait has started limiting oil production in some of its oil fields after exhausting storage capacity, the Wall Street Journal reported on Friday. According to analysts, if the crisis caused by the war continues, other OPEC countries may also make similar decisions.

According to “WSJ”, Kuwait, the founding state of OPEC, has already started limiting production and is considering further reduction of production and refining capacity to a level that only covers domestic demand. A decision on this matter is to be made in the coming days.

The cause of the crisis is the paralysis of navigation through the Strait of Hormuz in connection with the armed conflict with Iran.. About one-fifth of the world's oil supplies pass through this strait every day. With the export route closed, oil flows back into onshore reservoirs, which fill up quickly.

According to the Kepler analytical company quoted by the daily, At the current rate, Kuwait's reservoirs will be completely full within about 12 days. A similar situation applies to other larger manufacturers; warehouses in Saudi Arabia and the United Arab Emirates could reach maximum capacity within three weeks, according to the company. Iraq was already forced to cut production by more than half earlier this week.

“WSJ” notes that Saudi Arabia has larger storage capacity and can partially bypass the Strait of Hormuz by directing exports via pipeline to the port of Yanbu on the Red Sea, but it is unable to fully compensate for the disruptions.

Oil prices have increased significantly since the beginning of the conflict. Brent, the global reference crude oil, broke through the level of USD 90 per barrel on Friday, compared to approximately USD 72 last week. This was the effect of, among others, President Donald Trump's announcement that he will not accept any agreement with Iran other than unconditional surrender. Analysts warn that if more oil fields are shut down in the coming days, the price of Brent may exceed $100 per barrel.

A similar situation exists on the gas market due to Iranian attacks on the infrastructure of Qatar, the main producer in the region. Qatar's Energy Minister Saad al-Kabi told the Financial Times that even if the war ended immediately, it would take Qatar “weeks or months” to restore normal supplies after Iran bombed the Ras Laffan plant. The minister also warned that the price of a barrel of oil may reach as much as $150 if the current situation continues, and that continuing the war for the next few weeks may lead to the collapse of economies.

“There will be shortages of some products and there will be a chain reaction of factories that will not be able to supply them,” al-Kabi said.

From Washington Oskar Górzyński (PAP)

osk/ap/