Iranian Oil Production Faces New Challenges Amidst Trade Blockade
The United States initiated a blockade on April 13th, blocking shipping in and out of Iranian ports. This has resulted in approximately 2 million barrels per day (bpd) of Iranian crude being unable to reach its primary buyer, China.
Any production shutdowns by Iran would exacerbate the already disrupted supply situation, which is at over 12 million bpd due to regional conflict. This could lead to tighter markets and higher oil prices.
Iran’s onshore storage capacity is estimated to be around 90 million barrels out of a total capacity of approximately 122 million barrels. FGE NextantECA suggests that Iran can maintain current production levels for about two months without exports, extendable to three months with a modest 500,000 bpd reduction.
However, Energy Aspects assumes significantly lower onshore storage at around 30 million barrels. In this scenario, Iran could sustain export levels for approximately 16 days before running out of storage capacity.
The blockade may not have a significant impact in April but if it continues into May, substantial output reductions are likely. Richard Bronze from Energy Aspects suggests that Iran will likely use available oil tankers as floating storage to delay production cuts.