Oil exporters in the Persian Gulf, currently unable to export their hydrocarbon products, are all facing a dire short-term outlook. They're running out of STORAGE SPACE and may have to HALT OIL WELLS.
Unable to store additional oil in strategic reserves and state-owned or privately-owned facilities, they will soon be forced to halt production at some of the largest oil fields on earth.
This will have disruptive consequences for following these countries:
- Iraq
- Kuwait
- UAE
- Qatar
- Saudi Arabia
When these producers fill their storage tanks to capacity, some within a matter of DAYS from now, there will be no other option but to HALT production from the oil fields.
Depending on the geology of the field and the specific technologies implemented, shutting down wells could even permanently damage reservoirs and production infrastructure.
At that point, in addition to the supply disruption at Hormuz, markets will face the prospect of a medium to long-term reduction in overall oil supply from the Middle East.
This would cause a massive risk premium for oil prices — and particularly regional crude grades — for months, or potentially longer, depending on the course of the war.
Historically, storage tanks are rarely utilized above the 80% threshold; The tanks need to have room for the oil to swell from the outdoor heat. Therefore, filling them to absolute maximum capacity may not be technically feasible or even possible, and the real countdown may be even shorter than anticipated in the chart atop this story!
Two further considerations must be mentioned:
When storage space runs out, some countries such as Saudi Arabia and UAE may still have the ability to divert some energy flows to alternative routes, continuing exports. However, this presents a strategic opportunity for Iran-aligned forces to deliver a tremendous blow to these regional U.S. partners by striking that specific infrastructure.
When regional oil producers are faced with the risk of a total production halt, their sovereign survival will be at stake. Without oil revenues, these government will have no money coming in. NONE! The sovereign governments themselves would face their own demise.
At that point, an expansion of the Iran/US/Israel war becomes inevitable as Riyadh and Baghdad (the first and second OPEC producers) suffer catastrophic daily economic damage.
Where and with whom they will go to war over this — is another story entirely.
