According to a report released on Monday by energy analytics firm Kpler, Iran's available crude oil storage capacity is being rapidly depleted, with remaining space sufficient for only about 12 to 22 days. This development suggests that the country, once OPEC's second-largest oil producer, may be forced to further reduce its output in the near term.
The report indicated that if inventory pressures persist, Iran might need to slash its current production by an additional 1.5 million barrels per day before mid-May. This would represent a reduction of more than half from current levels, bringing output down to between 1.2 and 1.3 million barrels per day by the middle of May. The tightening storage capacity is becoming a significant constraint limiting its ability to continue production.
Previously, Goldman Sachs Group stated last week that Iran's daily crude oil production had already fallen by as much as 2.5 million barrels. The investment bank also noted that it would take "months" for oil supplies from the Persian Gulf region to recover. Since the conflict erupted on February 28, neighboring oil-producing countries such as Saudi Arabia, Iraq, Kuwait, and the UAE have also had to reduce their output.
Reports indicate that due to a domestic oil glut, Iran is reactivating decommissioned sites referred to as "scrap storage," utilizing temporary containers, and attempting to transport crude oil to customers via railway. These unusual measures are aimed at delaying an infrastructure crisis and diminishing Washington's influence in the standoff in the Strait of Hormuz.
The conflict between the U.S. and Iran has evolved into a contest to see whether Tehran's oil industry or global energy consumers will achieve a breakthrough first. Every barrel of oil that cannot be shipped through normal export channels must find a destination: it must be placed into storage tanks, loaded onto vessels, held in temporary storage sites, or left buried underground.
An expert on the Middle East and North Africa suggested that Iran hopes to avoid a scenario where it is forced to shut down revenue streams, which would exacerbate its financial losses. A shutdown would increase pressure and potentially drive negotiations forward.
Kpler's analysis noted that although production and exports have clearly been impacted, financial pressure will not manifest immediately. The report suggests it could take the Iranian government several months to truly feel the effects of declining revenue.
Since the U.S. President ordered a maritime blockade of Iranian ports in early April, the country's crude oil exports have seen a significant decline. Data shows that recent Iranian crude shipments have fallen to approximately 567,000 barrels per day, whereas in March, the figure remained around 1.85 million barrels per day.
However, the sharp drop in exports does not immediately translate into reduced cash flow. Kpler explained that there is typically a long cycle between shipment and final payment. This time lag means the full impact of the blockade on revenue is likely to materialize gradually over three to four months.
The report also pointed out that Iran's exports often occur through opaque channels to evade sanctions, which further prolongs the transaction cycle.
On the transportation front, Kpler stated that no tankers have been observed successfully bypassing the U.S. blockade measures near the Strait of Hormuz. Researchers said that since the U.S. blockade began, the volume of crude loaded onto tankers from Iran has plummeted by approximately 70%.
Satellite analysis from TankerTrackers.com estimates that six tankers forced to return to Iranian ports in recent days were carrying an estimated 10.5 million barrels of oil. Analysts noted that the U.S. military has been diverting vessels linked to Iran towards the Far East and the Strait of Malacca, making it unclear whether these cargoes will reach buyers or be intercepted and redirected back to Iran.
With transportation constrained, storage space tightening, and exports continually hampered, multiple factors are converging to exert sustained pressure on Iran's oil industry. The U.S. Treasury Secretary stated on social media that Iran's oil industry is "beginning to shut down production" as a result of the American blockade.
A senior energy trader at a private wealth management group noted that markets still widely expect shipping flows to begin normalizing between May and June, which has somewhat tempered the rise in oil prices.
However, she also pointed out that the sense of urgency is intensifying. Each day of delay tightens the supply-demand balance in the physical market, depletes buffer capacity, and increases risks, meaning that any upward move in oil prices could be more pronounced.
A market analyst at XS.com commented that futures markets are pricing in a long-term scenario of persistently tightening supply, with geopolitical risks remaining elevated. She added, however, that any substantive progress in negotiations could trigger a significant correction in oil prices.
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