 ▲ An oil tanker passing through the Persian Gulf © |
As the impact of the blockade of the Strait of Hormuz becomes a reality, supply instability in the global energy market is intensifying as Kuwait and the United Arab Emirates (UAE) also move to reduce crude oil production.
According to investment media outlet FXLeaders on March 8 (local time), Kuwait and the UAE have begun cutting crude production in response to the possible closure of the Strait of Hormuz. Abu Dhabi National Oil Company (Adnoc) said it is adjusting offshore production levels in response to storage facility conditions, while Petroleum Kuwait Corp. explained that it is reducing refinery and oil field output due to threats to maritime navigation from Iran.
The Strait of Hormuz is a key shipping route connecting the Persian Gulf to the open sea. As Iran’s maritime threats have escalated amid the Middle East war, the strait’s function has been significantly curtailed, disrupting export flows from the world’s largest oil-producing region. As a result, London crude prices have surged close to $93 per barrel, reaching their highest level in more than two years.
Kuwait’s production cuts began at around 100,000 barrels per day as of early Saturday, and were expected to nearly triple by Sunday. Any additional reductions will reportedly be decided gradually depending on storage levels and the situation in the Strait of Hormuz. Meanwhile, the UAE, the third-largest producer within OPEC, produced more than 3.5 million barrels per day in January.
The UAE also maintains some export infrastructure that bypasses the Strait of Hormuz. Adnoc operates a 1.5 million-barrel-per-day pipeline to Fujairah, which it said enables it to maintain supply to international markets. However, while offshore production adjustments continue, onshore operations are proceeding as normal.
These production cuts come amid ongoing regional supply disruptions. Saudi Arabia recently shut down its largest refinery, Qatar halted its largest liquefied natural gas production facility, and Iraq also began reducing output as storage tanks started to fill. The outlet noted that such supply disruptions could stimulate demand for alternative energy and ultimately increase global inflationary pressure.
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