Iran is on the brink of a severe oil storage crisis, with research firm Kpler estimating the country has just 12 to 22 days of unused capacity remaining before it may be forced to slash production by an additional 1.5 million barrels per day by mid-May.
The crisis stems from a U.S. naval blockade of Iranian ports imposed in early April, which has crippled the country’s crude exports. Shipments have plummeted from an average of 1.85 million barrels per day in March to a mere 567,000 barrels daily, marking a staggering 70% decline. Kpler reports no tankers have successfully evaded the blockade in the Strait of Hormuz, underscoring the operation’s tight grip on Iran’s oil outflow.
Compounding the issue, Iran has already curtailed up to 2.5 million barrels of daily production since regional conflict intensified on February 28, according to Goldman Sachs. A further cut of 1.5 million barrels per day would deal a crushing blow to what was once OPEC’s second-largest producer.
Neighboring Gulf nations, including Saudi Arabia, Iraq, Kuwait, and the UAE, have also reduced output since the hostilities began, amplifying the strain on global oil supply. The effective closure of the Strait of Hormuz to Iranian shipments has deepened the disruption, removing significant volumes from an already tight market.
Despite the immediate physical constraints, Tehran’s financial pain is delayed. Iranian crude, primarily destined for Chinese ports, takes about two months to arrive, with buyers given an additional two months to settle payments. Kpler projects the full revenue impact won’t hit for another three to four months, providing a temporary buffer even as storage infrastructure reaches its limit.
The lag in financial consequences could shape diplomatic efforts. With no immediate cash crisis, Iran may face less urgency to negotiate over the blockade, even as its oil sector grinds toward a halt.
Global markets, meanwhile, are already feeling the ripple effects of these supply shocks. The potential for an additional 1.5 million barrels per day to vanish from Iran’s output by mid-May adds further pressure to oil prices, which have trended upward since the conflict’s onset.
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