English
English
English
The Strait of Hormuz, a vital route that carries nearly 20% of the world’s seaborne oil trade, has largely shut down amid the escalating conflict in the region. While some Iranian shipments continue to pass through, many vessels from other countries have halted operations due to security concerns.
Representational Image
New Delhi: The ongoing crisis in West Asia has begun to impact global energy markets, with Saudi Arabia reportedly reducing oil production as storage facilities near capacity following the near closure of the Strait of Hormuz.
Oil Exports Disrupted
The Strait of Hormuz, a vital route that carries nearly 20% of the world’s seaborne oil trade, has largely shut down amid the escalating conflict in the region. While some Iranian shipments continue to pass through, many vessels from other countries have halted operations due to security concerns.
As a result, oil exports from several Gulf nations have slowed sharply, pushing the price of Brent crude above $100 per barrel, raising fears of rising global inflation and economic instability.
Saudi Arabia Redirects Supplies
As the world’s largest oil exporter, Saudi Arabia produces about 10 million barrels of oil per day, exporting roughly 7 million barrels daily. The state-owned oil giant Saudi Aramco has reportedly begun diverting some shipments to Yanbu Port on the Red Sea using the East-West pipeline.
However, the pipeline’s limited capacity means that the entire export volume cannot be rerouted, forcing the country to reduce output to prevent storage facilities from overflowing.
Gulf Countries Also Cutting Production
Other Gulf producers, including the United Arab Emirates, Kuwait, and Iraq, had already begun scaling back production due to limited storage capacity. Saudi Arabia has now followed a similar approach, reportedly reducing output at two oilfields to manage storage levels.
Storage Capacity Nearing Limits
Analysts warn that the storage situation could worsen if the conflict continues. Investment bank JPMorgan had earlier estimated that Saudi Arabia’s oil storage capacity could be exhausted within two months of the conflict beginning.
According to energy analyst Antoine Halff of geospatial analytics firm Kairos, major Gulf producers around the Persian Gulf — Saudi Arabia, the UAE, Kuwait, and Iraq — together have storage capacity of just over 100 million barrels, roughly a third of their total production capacity.
However, experts say the usable storage level is likely lower, as operational storage usually does not exceed 80% of the nominal capacity, further tightening the supply situation in global oil markets.
