According to JPMorgan Chase, just seven days after the outbreak of Middle East geopolitical conflict, supply disruptions among Persian Gulf oil producers have accelerated and spread more rapidly than anticipated. On March 9, citing information from the Fenghua Trading Desk, JPMorgan's commodities research team issued an urgent update. Based on detailed data on storage tank capacity and oil tanker availability, the report presented a market-alerting forecast: current actual production cuts are approximately 2 million barrels per day (bpd). However, driven by the dual pressures of nearing full storage capacity and a severe shortage of tankers, regional production cuts are projected to exceed 4 million bpd before Friday, March 13.
The research report indicates this figure implies the global oil supply will lose, within a mere two weeks, an amount equivalent to more than twice Iraq's total national exports. As the conflict persists, shipping through the Strait of Hormuz is obstructed. Combined with production cuts from Middle Eastern oil producers, oil prices have surged continuously, and the effects are already being felt by consumers. Details are as follows:
By the seventh day of the conflict, Brent crude oil had rapidly climbed from around $83 per barrel before the conflict to surpass $94, marking a weekly increase of over 13%. The US average retail gasoline price jumped to $3.30 per gallon between March 4 and 5, reaching a two-year high, demonstrating that the pass-through effect to consumers has already materialized.
The pace of production cuts is faster than expected and still accelerating. JPMorgan's framework model indicates that the estimated production cut on the seventh day of the conflict was approximately 2.5 million bpd. Data firms like Kpler tracked reported disruptions of around 2 million bpd. The slight gap between these figures precisely indicates that actual cuts are rapidly approaching the trajectory predicted by the model. The report clearly states that supply disruptions are no longer confined to isolated individual oilfields but are beginning to spread across the entire region. The core mechanism driving this process is storage tank saturation forcing upstream shutdowns: when export routes are blocked and floating storage space is exhausted, producers have no choice but to gradually shut down upstream production. JPMorgan points out that Iraq's production cuts have moved from a warning phase to an implementation phase. Several major oilfields in the south have initiated production cuts, with initial reductions focused on core hubs like Rumaila. However, as storage capacity continues to tighten, larger-scale cuts across the southern oilfield cluster appear inevitable. Simultaneously, exports from the Kurdistan region have effectively stalled. HKN Energy Company announced a suspension of operations at the Sarsang oilfield following a drone attack, further exacerbating the supply shortfall in northern Iraq. Furthermore, as previously reported, both Abu Dhabi National Oil Company (Adnoc) and Kuwait Petroleum Corporation have announced production cuts. The UAE stated it is "adjusting offshore production levels to manage storage needs," while Kuwait explicitly attributed its cuts to "Iran's threats to the safe passage of vessels through the Strait of Hormuz."
Tanker Crisis: Available Shipping Capacity in Persian Gulf Plummets 78% JPMorgan's storage capacity matrix reveals stark differences in the resilience of various oil-producing countries:
Data clearly shows that Iraq is the most vulnerable link, with its storage buffer capable of lasting only about a week; Kuwait follows closely. Saudi Arabia, with its massive storage capacity (available capacity as high as 229 million barrels) and some alternative export routes, possesses relatively stronger short-term shock absorption capacity, but it cannot remain entirely unaffected. JPMorgan also emphasized in its report that the collapse of the tanker market in this crisis is occurring at a startling rate. According to Kpler data, only 14 Very Large Crude Carriers (VLCCs) are currently operational within the Persian Gulf (three of which are linked to Iran), compared to 64 before the conflict erupted—a drop of 78%.
JPMorgan warns that starting this week, oil-producing countries will be forced to move crude into onshore storage tanks. This will significantly accelerate the rate at which storage fills up, thereby pushing the entire region more rapidly into a phase of forced production shutdowns.
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