From 3 million barrels a day to potential shutdown: How the US blockade is strangling Iran's oil sector
Even as Iran tightens its grip on global energy flows by controlling the Strait of Hormuz, its own oil sector is under mounting pressure from a US naval blockade. With no way to export the oil it is pumping out and diminishing storage space at home, Iran may be forced to dramatically reduce or cease production from some of its wells, perhaps as soon as two weeks, AP reported, quoting experts.The situation may not be as difficult as US President Donald Trump recently suggested, when he warned that pipelines could start exploding within days. However, if production is halted, restarting output from Iran’s ageing oil wells could prove difficult, or even impossible, potentially harming its long-term oil capacity.Analysts say Iran has already started reducing production to avoid a complete shutdown. Pressure is mounting as the US Treasury Department intensifies sanctions targeting Iranian oil shipments already in transit. At the same time, the US military has intercepted at least two tankers off the coast of Asia that are suspected of carrying Iranian oil.With its oil exports restricted, Iran is receiving less foreign currency, putting further strain on an economy already hit by war, unrest, and long-standing sanctions. At the same time, reduced tanker traffic is amplifying the impact of disruptions in the Strait of Hormuz, worsening supply constraints, AP reported.As a result, shortages of jet fuel are emerging and gasoline prices are climbing worldwide, as global energy markets feel the squeeze from limited oil flows.Here's what experts sayIran's leaders “are really resisting” shutting down oil wells because of how painful that would be long-term, said Miad Maleki, a former sanctions expert at the US Treasury who is now a senior fellow at the Washington-based Foundation for Defence of Democracies.“They’ve been under sanctions, they’ve been isolated for 47 years now. Those oil wells are not maintained well. Their machinery is not maintained well," Maleki said. Once shut off, he added, the wells won't easily “snap back after a few months.”The squeeze on Iran intensifiesBefore the war, Iran was producing over 3 million barrels of crude oil per day, with slightly more than half consumed domestically. However, since the US blockade began on 13 April, tankers have been loaded with oil but remain unable to leave, effectively leaving shipments stranded, as reported by AP.“It looks like there’s been a significant slowdown in production,” said Antoine Halff, the co-founder and chief analyst at Kayrros, an environmental intelligence company that tracks emissions and energy supply chains. He pointed to signs that storage is not filling as fast as usual at Kharg Island, Iran’s main oil export terminal in the Persian Gulf.Iran is likely storing some of its oil in tankers positioned around Kharg Island, Halff noted.According to commodities tracking firm Kpler, Iran still has limited capacity to store additional crude, enough for roughly 12 to 22 days of production, even after output cuts.“While the immediate revenue impact is limited, operational constraints are now forcing production cuts and setting up a delayed but significant financial squeeze,” wrote Homayoun Falakshahi, an analyst at Kpler.Wood Mackenzie, another oil analysis firm, estimates Iran will run out of storage capacity in about three weeks.“If the blockade persists, cuts become inevitable,” wrote Alexandre Araman of Wood Mackenzie. Shutdowns of more than a month “risk long-term damage” to Iran’s oil reservoirs, he wrote, adding that recovering older fields “remains uncertain.”Iran’s oil industry has long been a shaky lifelineSince oil was first discovered in Iran in 1908, the country’s energy sector has been deeply tied to regional politics. Efforts to nationalise its oil industry and take control from British interests led to the CIA-backed 1953 coup that reinforced Shah Mohammad Reza Pahlavi’s rule. That event also set the stage for the 1979 Islamic Revolution, which ultimatel
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