The UAE announced an adjustment to its offshore production levels to address storage requirements. Kuwait’s production cut is expected to increase from 100,000 barrels per day on Saturday to 300,000 barrels per day on Sunday. The wave of production cuts by Middle Eastern oil-producing countries has pushed Brent crude prices to a two-year high, surpassing $93 per barrel. Trump stated on Saturday that oil prices would quickly fall back.
The near blockade of the Strait of Hormuz is triggering a chain reaction of production cuts among Middle Eastern oil-producing countries, placing global energy supplies under severe pressure.
The Abu Dhabi National Oil Company (Adnoc) and Kuwait Petroleum Corporation have successively announced production cuts. The former stated it is 'adjusting offshore production levels to address storage requirements,' while the latter explicitly attributed the reduction to 'Iran's threats to the safe passage of vessels through the Strait of Hormuz.'
This wave of production cuts has driven Brent crude prices to their highest closing level in over two years, surpassing $93 per barrel, intensifying global inflationary pressures. In a previous article, Wall Street News noted that JPMorgan indicated the rapid spread of the 'shutdown wave' among Middle Eastern oil producers could lead to a potential $30 surge in oil prices in the event of a full shutdown.
Earlier this week, Iraq began limiting production due to nearing storage capacity saturation, Saudi Arabia’s largest refinery shut down following a drone attack, and Qatar’s largest liquefied natural gas export facility also ceased operations. The production cut decisions by the UAE and Kuwait represent the latest emergency measures taken by Middle Eastern oil producers.
Kuwait announces force majeure, with production cuts expected to expand to 300,000 barrels per day
Kuwait Petroleum Corporation has formally declared force majeure (a legal clause allowing companies to be exempt from fulfilling contractual obligations under uncontrollable circumstances) covering the sale of crude oil and refined products.
According to Bloomberg citing sources familiar with the matter, Kuwait’s production cuts, initiated earlier Saturday at approximately 100,000 barrels per day, are expected to nearly triple by Sunday. Further reductions will depend on storage levels and developments in the Strait of Hormuz.
Kuwait’s crude oil production in January was approximately 2.57 million barrels per day. Given its sole reliance on the Strait of Hormuz for export routes, any prolonged blockade of the strait would deplete its storage capacity within weeks or even days.
Kuwait had already begun reducing processing loads at its refineries, with the combined daily processing capacity of its Al-Zour, Mina Al-Ahmadi, and Mina Abdullah refineries totaling approximately 1.4 million barrels, of which the Al-Zour refinery is one of the largest oil processing facilities in the Middle East.
The UAE announces an adjustment to offshore production levels to address storage needs
As the third-largest oil producer in OPEC, the UAE produced over 3.5 million barrels per day in January. The Abu Dhabi National Oil Company (Adnoc) announced that it is "adjusting offshore production levels to meet storage demands." Although the UAE possesses an alternative route bypassing the Strait of Hormuz, this alternative cannot fully replace the strait.
Adnoc operates a pipeline with a daily capacity of 1.5 million barrels, directly connecting to the port of Fujairah on the UAE's west coast, which can sustain partial exports if the strait is blocked. Adnoc stated that its onshore operations are currently running normally and that it is leveraging international storage facilities to ensure supply to global markets.
Saudi Arabia, as the largest oil-producing country in the region, has also rerouted some of its crude oil to the port of Yanbu on the Red Sea coast to circumvent the risks associated with the Strait of Hormuz.
Blockade of Hormuz Disrupts Global Energy Markets
The Strait of Hormuz is a critical chokepoint connecting the Persian Gulf to international waters and serves as the core channel for global crude oil exports. Due to conflicts in the Middle East and threats from Iran against passing vessels, this waterway has nearly closed, severely obstructing exports from the world’s most important oil-producing region.
The closing price of London Brent crude oil futures subsequently rose to $93 per barrel, marking a more than two-year high. This prompted consumer nations to seek alternative supply sources and exacerbated global inflation risks.
Gulf countries such as the UAE and Kuwait have become primary targets for Iranian missile and drone strikes during this round of conflict. The U.S. Embassy in Kuwait was attacked, and the U.S. Consulate in Dubai was also listed as a target, resulting in damage to infrastructure in both countries.
Trump: Oil Prices Will Eventually Fall
U.S. President Trump spoke to reporters aboard Air Force One on Saturday. When asked whether he was concerned about gasoline prices, Trump responded, "No concern."
Trump predicted that oil prices would significantly drop after the war ends. He characterized the conflict as "a minor operation" and noted that it "might continue for some time."
"We anticipated that oil prices would rise, and they did," Trump said. "But the prices will come down as well, and they will drop very quickly."
Editor/Wendey
