Iran running out of space to store its crude oil; is the real financial crisis still coming?
The Middle East conflict has already been rattling global oil flows, draining supplies, tightening reserves and pushing crude prices higher across markets. But Iran, one of the key flashpoints in the crisis, seems to be dealing with a different kind of pressure altogether. Instead of just struggling with disrupted exports, the country is now staring at a quieter but equally awkward problem, where to actually put its oil. As storage space fills up fast and the system comes under growing strain, Tehran is facing an uncomfortable question: how long can production really keep going before cuts become unavoidable? According to research firm Kpler, as cited by Bloomberg, the answer may be just a matter of weeks.The firm estimates that Iran has only 12 to 22 days of unused storage capacity left, warning that this tight buffer could force the country to slash crude output by as much as 1.5 million barrels per day by mid-May.And this comes at a time when Iranian production is already significantly lower. Last week, Goldman Sachs Group Inc. said that the country has already held back up to 2.5 million barrels per day of crude output, Bloomberg reported. Other major Gulf producers, including Saudi Arabia, Iraq, Kuwait and the United Arab Emirates, have already reduced supply.
Iran’s oil output under strain – What it means for Tehran’s finances
Despite the tightening situation, Kpler suggested that the immediate financial impact on Iran may remain delayed. It said the country is unlikely to feel the full revenue strain for several months.Oil exports from Iran have already fallen sharply since early April, when the US President ordered a naval blockade of Iranian ports. With reduced movement through the Strait of Hormuz, shipments have dropped to around 567,000 barrels per day, down from an average of 1.85 million barrels per day in March, according to Kpler.Even so, the report noted that the impact on Iran’s revenues will not be immediate. Kpler said that it takes around two months for Iranian crude cargoes to reach Chinese ports, the main destination for its oil exports, often moving through indirect channels aimed at bypassing sanctions. Payments from buyers then take a further two months to be settled, the agency reported.So, the final impact to reveniues will take anywhere between three to four months.Kpler added that it has not seen evidence of tankers successfully evading the US naval blockade in the Strait of Hormuz region. It also highlighted that ever since the blockade began, loadings of Iranian crude onto tankers have fallen by nearly 70%.Now, the Middle East crisis has touched the two month mark, with no resolution in sight. The second attempt towards a peace deal also ended on a cold note as Trump on Saturday cancelled his envoys’ planned trip to Pakistan, who were supposed to meet Iranian leaders in Islamabad and hold peace talks with Tehran. He also criticised Iran’s leadership, saying that “nobody knows who is in charge”. The war began back on February 28 when Israel and US launched joint strikes on Iran. Since then Tehran has continued to tighten its grip on the crucial Strait of Hormuz, world’s energy pipeline that carries 20% of global oil supplies.
