Iraq’s oil output slumps 70% as Gulf shipping disruptions escalate

IRAQ’S crude oil output from its southern oilfields has dropped dramatically by about 70 percent since the outbreak of the U.S. and Israeli war with Iran. Production that previously averaged around 4.3 million barrels per day has now fallen to roughly 1.3 million barrels daily.

An official from the state-run Basra Oil Company told Reuters that storage facilities for crude have already been filled to capacity. As a result, the reduced volume still being produced will mainly be allocated to meet the needs of Iraq’s domestic refineries, Oilprice.com reported.

The disruption of tanker traffic through the strategic Strait of Hormuz forced Iraq to become the first major oil producer to cut output. The reductions started last week, and analysts had warned that similar measures could be taken by other producers once their storage facilities also reach capacity. Soon after Iraq’s decision, both Kuwait and the United Arab Emirates announced their own production cuts as shipping through the waterway slowed.

Although exports from Iraq have not completely stopped, loading activities have declined sharply. On Sunday, only two oil tankers were filled at southern export terminals, each carrying about two million barrels. The vessels, the Hong Kong-flagged Cospearl Lake and the China-flagged VLCC Yuan Hua Hu, were still located in the Persian Gulf, according to ship-tracking data from Marine Traffic.

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The impact on Iraq’s exports has been severe. Reuters reported that average daily shipments have plunged from more than 3.33 million barrels to roughly 800,000 barrels per day as of Sunday. An official from Iraq’s oil ministry described the situation as the most serious operational challenge facing the country’s oil sector in more than 20 years.

The broader supply disruption across the Gulf, linked to the war between the U.S., Israel, and Iran, has also driven global oil prices higher.