The Strait of Hormuz is shut, with many countries facing supply shortages. Goldman Sachs estimates that 14.5 million barrels per day of Persian Gulf production losses are draining global oil stockpiles at a record rate of 11 to 12 million barrels per day through April.
While the world is running out of oil, Iran is running out of room to store the crude it can no longer export.
How the US Blockade of Hormuz Reshaped Iran’s Oil Flows
In line with a presidential proclamation, US Central Command (CENTCOM) imposed a blockade on all maritime traffic moving in and out of Iranian ports beginning at 10 a.m. ET on April 13.
In the weeks since, Iranian crude exports have plummeted, falling from 1.85 million barrels per day in March to around 567,000 bpd, Bloomberg reported, citing the shipping intelligence firm Kpler.
This represents a drop of nearly 70%. The analysts reported that no tanker has managed to slip past the blockade near the Strait of Hormuz.
With exports choked off, Iran is running out of options for storing crude. The country has just 12 to 22 days of unused storage capacity left, Kpler analysts wrote.
Goldman Sachs Group Inc. said last week that Iran has already cut crude production by roughly 2.5 million barrels per day. The storage crunch raises the likelihood that Tehran will be forced to slash daily output by another 1.5 million barrels by mid-May.
The ripple effects extend across the region: neighboring producers, including Saudi Arabia, Iraq, Kuwait, and the UAE, have also had to scale back output since the conflict broke out on February 28.
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Still, Tehran will not feel the revenue hit immediately. Crude shipments to China typically take about 2 months to arrive. Buyers then take another two months to clear their bills. That delay pushes the financial pain out three to four months, even as physical storage runs dry.
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