Kuwait announces oil production cuts, exacerbating the global energy supply crisis

Cailian Press, March 8 (Editor: Niu Zhanlin) Kuwait officially announced on Saturday local time that due to the Iran conflict preventing oil tankers from passing through the Persian Gulf, the country has declared a force majeure and implemented “preventive” crude oil production and refining cuts.

However, Kuwait did not disclose the specific scale of the production reduction but stated that this cut is a “preventive measure” and will be reassessed based on the evolving situation.

Reasons for force majeure include: Iran’s explicit threats to the safe passage of ships through the Strait of Hormuz, ongoing attacks by Iran on Kuwait, and the near-complete lack of ships available to transport crude oil and petroleum products in the Arabian Gulf region.

Kuwait is the fifth-largest oil producer in OPEC. Data shows that the country’s oil production in January this year was about 2.6 million barrels per day.

Analysts expect that as oil storage space gradually depletes, the UAE and Saudi Arabia may soon also have to cut oil output.

Kuwait Petroleum Corporation emphasized that the company “is fully prepared to resume normal production once conditions permit.”

Due to the severe disruption of global energy supplies caused by the Iran conflict, oil prices have surged approximately 35% this week. Amid threats from Iran to attack ships, shipowners are concerned about tanker safety and have stopped passing through the critical route—the Strait of Hormuz.

Most of the crude oil from Gulf Arab oil-producing countries, including Kuwait, needs to be exported through the Strait of Hormuz. This narrow waterway is the only passage in and out of the Persian Gulf, and about 20% of global oil consumption is transported through it.

With tanker transportation nearly halted, a large amount of crude oil is accumulating in the Middle East but cannot be exported. As storage space runs out, Gulf oil-producing countries are forced to reduce production.

Iraqi officials previously stated that, due to storage capacity nearing its limit, Iraq has cut its oil production by 1.5 million barrels per day.

Natasha Kaneva, head of Global Commodities Research at J.P. Morgan, said on Friday: “The market’s pricing logic is shifting from simply reflecting geopolitical risks to responding to tangible operational disruptions.”

Kaneva’s report also pointed out that if the US-Iran war lasts more than three weeks, the oil storage capacity of Gulf countries will be exhausted, and these countries may be forced to further shut down production, pushing global benchmark Brent crude prices above $100 per barrel.

J.P. Morgan forecasts that if the Strait of Hormuz remains closed, global oil output reductions could exceed 4 million barrels per day by next weekend.

On Friday, Brent crude futures rose 8.52% in a single day, closing at $92.69 per barrel. US WTI crude futures increased by 12.21%, closing at $90.90 per barrel.

This week, US WTI crude futures surged by 35.63%, marking the largest weekly gain since the contract was launched in 1983. Brent crude rose 28% this week, the biggest weekly increase since April 2020.

The Iran conflict has also impacted global natural gas supplies. Qatar, on Monday, shut down liquefied natural gas (LNG) facilities after being attacked by Iran. Qatar accounts for about 20% of global LNG exports.