Kuwait and UAE May Follow Iraq in Cutting Oil Production

Analysts suggest that Kuwait and the United Arab Emirates could be the next major oil producers forced to cut output due to the ongoing crisis involving Iran. This follows a similar move by Iraq earlier this week.

The primary issue is the severe disruption to shipping through the Strait of Hormuz, a critical chokepoint for global energy supplies. Approximately one-fifth of the world's seaborne crude oil and liquefied natural gas transits this narrow waterway. Ship traffic has nearly halted after Iran attacked six vessels since the crisis began.

Iraq has already reduced its oil production by almost 1.5 million barrels per day, with potential for that cut to exceed 3 million barrels daily in coming days. The country lacks sufficient storage capacity for unsold crude.

According to a recent JPMorgan analysis, Kuwait has the capacity to store its produced oil for only about 18 more days, while the UAE can hold out for roughly 22 days. If export disruptions via Hormuz persist beyond these periods, both nations would have no choice but to slash production.

Shipping data from Vortexa and Kpler indicates that around 300 oil tankers are currently stranded in the strait. While technically still open, practical passage has become extremely difficult.

Insurance companies have drastically increased premiums for vessels attempting the crossing since the start of hostilities, with some refusing coverage altogether. This has rendered transit through Hormuz economically unviable for most carriers.

Iranian Foreign Minister Abbas Araqchi recently stated in an interview that Tehran has "no intention of closing the Strait of Hormuz now." However, he acknowledged that all possible scenarios are being considered during wartime.