Kuwait said on Saturday it had cut oil production and refining as threats from Iran prevent tankers from transiting the Persian Gulf.
The Arab monarchy did not say how many barrels per day it had cut, but said the production cuts were a precautionary measure that would be “reviewed as the situation evolves.”
Kuwait is the fifth largest oil producing country within OPEC. In January, it produced about 2.6 million barrels per day.
The state-run Kuwait Oil Corporation said it “remains fully prepared to restore production levels when the situation allows.”
Oil prices rose about 35% this week as the Iran war caused massive disruptions to global energy supplies. Tankers have stopped transiting the crucial Strait of Hormuz as owners fear the vessels will be attacked by Iran.
Gulf Arab oil producers like Kuwait export barrels through the strait. This narrow waterway is the only way into and out of the Persian Gulf. Approximately 20% of the world’s oil consumption is exported through the Strait.
In the Middle East, oil barrels are piling up with nowhere to go because tankers are stuck. Gulf Arab countries are running out of space to store barrels and are being forced to cut production. Iraqi officials told Reuters on Tuesday that Iraq had already cut its output by 1.5 million barrels a day due to a lack of storage space.
“The market is moving from pricing pure geopolitical risk to grappling with tangible operational disruptions,” Natasha Kaneva, JPMorgan’s head of global commodity research, told clients in a note Friday.
Kaneva said in a memo last Sunday that if the war between the US and Iran lasts for more than three weeks, Gulf Arab states will run out of storage capacity and halt oil production. That would push global benchmark Brent crude prices above $100 a barrel, he said.
JPMorgan estimates that if the Strait of Hormuz remains closed, production could be cut by more than 4 million barrels a day by the end of next week.
On Friday, crude oil posted its biggest weekly gain in futures trading history. Brent futures rose 8.52%, or $7.28, to settle at $92.69 per barrel. West Texas Intermediate futures jumped 12.21%, or $9.89, to close at $90.90 per barrel.
U.S. crude oil soared 35.63%, the biggest weekly gain in the history of futures contracts dating back to 1983. Brent crude oil soared 28%, posting its biggest weekly gain since April 2020.
The Iran war also disrupted global natural gas supplies. Qatar suspended liquefied natural gas production on Monday following an attack by Iran. About 20% of global LNG exports come from Qatar.
LNG cools natural gas into a liquid that can be loaded into tankers and exported around the world. Natural gas is used to generate electricity and heat homes.
