Kuwait Confirms Oil Output Slowdown as Storage Fills Up
Kuwait's national oil company has announced plans to start throttling down production, confirming concerns that it would have to start shutting down within days due to limited storage capacity. It is the latest consequence of Iran's Strait of Hormuz attacks, and it follows shortly after Iraq began ordering its largest oilfields to shut in wells because of an absence of empty tanker tonnage to take on cargoes.
In a statement, the Kuwait Petroleum Corporation (KPC) said that the measure is purely a precaution, and it will be reviewed regularly. The firm said that its supplies to the domestic market are assured, and that it is "fully prepared to restored production levels once conditions allow."
The shutdown occurred a few days ahead of a predicted deadline, and analysts suggest that KPC decided to throttle back output early at some fields in order to preserve a buffer of remaining storage. Reduced-output wells are faster and easier to reactivate than wells that have been fully shut in.
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Iran is serious about its closure order, and has attacked at least two vessels physically located in the Strait of Hormuz since it was issued last week. Western tonnage has largely given up the crossing, save for a handful of vessels transiting with transponders turned off - and not all of them are tankers. By contrast, the National Iranian Oil Company continues to load cargoes at Kharg Island and to dispatch its shadow-fleet tankers through the Strait of Hormuz, maintaining de minimus supply for its Asian customers. It has also begun to use its Jask oil terminal on the Gulf of Oman, on the eastern side of the strait, according to TankerTrackers.com.
The tightening supply picture in the Mideast is beginning to have price effects. Oil prices could spike as high as $150 per barrel within weeks if the strait remains closed, Qatari Energy Minister Saad al-Kaabi told the Financial Times on Friday. He confirmed that all of the major GCC exporting nations will have to declare force majeure eventually if the shutdown continues, he warned.
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