Iran will reach a complicated position in maximum 22 days, due to the naval blockade imposed by the US

The blockade imposed by the US is starting to affect Iran's oil flows, which are rapidly depleting their storage capacities, as exports are no longer possible. Although the immediate impact on revenues is limited, operational constraints are now forcing production cuts and will trigger a financial crisis, says a report from research firm Kpler.

The effects of the US-imposed naval blockade are causing serious problems for Tehran, which is currently resisting negotiating under the terms offered by the Trump administration.

The aftermath? “Iran is rapidly running out of storage space for crude oil, which threatens to accelerate production cuts,” according to research firm Kpler, cited by Bloomberg.

The Islamic Republic has enough unused storage capacity for another 12-22 days, analysts wrote in a report on Monday.

This means Iran could be forced to cut daily oil production by another 1.5 million barrels by mid-May, they added.

Iran has already cut daily crude oil production by up to 2.5 million barrels, Goldman Sachs Group Inc. said. last week.

Iranian crude oil tanker loadings have also fallen by about 70 percent since the U.S. embargo took effect, the researchers noted.

There is an even riskier scenario for Tehran. If Iran is forced to shut down wells due to a lack of storage space, the resulting pressure swings could damage the fields.

Despite the bleak outlook for Iranian oil production, the regime in Tehran probably won't begin to feel the full brunt of the financial crisis for several months, Kpler wrote.

The American blockade

The Iranian regime's crude oil exports have fallen sharply since early April, when the US president ordered a naval blockade of Iranian ports.

Dozens of ships trying to reach Iranian coasts or leave Iranian ports were turned away by US naval forces.

As traffic through the Strait of Hormuz has eased, Iranian shipments have recently fallen to about 567,000 barrels per day, Kpler said. In March, exports averaged about 1.85 million barrels per day.

However, the blockade won't hurt Iran's profits that quickly, with the impact on revenues expected to be felt in about three to four months, Kpler said.

Shipments of Iranian crude typically take about two months to reach some Chinese ports, the main destination for the regime's crude, often arriving through opaque channels designed to circumvent sanctions.

Buyers then have two more months to make payments, according to Kpler.

What's next

Kpler said he had not observed any oil tankers that had managed to avoid the US naval blockade in the region around the Strait of Hormuz.

“While the blockade does not financially suffocate Iran in the short term, it promises to do so in the long term if maintained. And the fact that Tehran has demanded lifting the blockade as a condition for resuming negotiations underscores that it hits exactly where it hurts,” the researchers wrote.

How pressured Iran will feel to return to negotiations remains to be seen. Two possible attempts at negotiations failed last week.

Iran has offered the United States a new proposal to reopen the Strait of Hormuz and end the war, with negotiations on the nuclear program to be postponed to a later stage, according to a US official and two well-informed sources cited by Axios.

President Donald Trump signaled on Monday that he was unlikely to accept that option.

The proposal recently submitted by Iranian authorities was discussed by President Trump with senior national security officials on Monday. The conclusion of the meeting was that reopening the strait without addressing nuclear enrichment could remove a key element of the United States' negotiating leverage, making the deal unlikely, according to people familiar with the situation.