MAJOR oil-producing nations in the Middle East Gulf have significantly reduced crude output, with total cuts now exceeding 5 million barrels per day (bpd). The reductions come as tanker movements through the Strait of Hormuz remain effectively halted, limiting the ability of producers to export crude and forcing upstream production adjustments, according to Oilprice.com.
With storage facilities filling up and exports constrained, leading Gulf producers, many of them key members of Organization of the Petroleum Exporting Countries, have begun scaling back production to avoid oversupply in domestic storage hubs.
Saudi Arabia has reportedly cut its oil production by between 2 million and 2.5 million bpd, according to sources cited by Bloomberg. The move follows earlier reports that state-owned oil giant Saudi Aramco had started reducing output at two of its oil fields as export routes became constrained by the disruption in Hormuz.
Although Saudi Arabia can divert some crude shipments through the Red Sea using its east–west pipeline system, the available capacity is only a fraction of the volumes typically transported through the Hormuz passage.
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Elsewhere in the region, Iraq, the second-largest producer in OPEC after Saudi Arabia, has also curtailed production sharply. Output has reportedly been reduced by roughly 2.9 million bpd, according to Bloomberg’s sources.
Other Gulf producers have followed suit. The United Arab Emirates has cut between 500,000 and 800,000 bpd, while Kuwait has lowered output by around 500,000 bpd, according to people familiar with the matter who spoke on condition of anonymity due to the sensitivity of the data.
During Aramco’s fourth-quarter earnings call on Tuesday, President and CEO Amin Nasser, declined to comment on Saudi production figures. However, he warned that continued disruption to shipping through the Strait of Hormuz could have ‘catastrophic consequences’ for both the oil market and the broader global economy.
On the geopolitical front, Donald Trump attempted to calm markets on Monday, saying the conflict could soon come to an end. But Iran responded on Tuesday by vowing it would not allow ‘a litre’ of oil to leave the Middle East until the United States and Israel halt their military strikes.
Analysts say the market remains highly sensitive to developments around the key shipping route. According to commodities strategists Warren Patterson and Ewa Manthey at ING Group, the market will ultimately need to see oil flows through the Strait of Hormuz resume before prices can sustainably decline.
“Trump’s words will only go so far,” the analysts said in a Tuesday note, adding that without a restoration of shipments through the strait, oil prices may not yet have reached their peak.
