Iran could soon be forced to cut back its oil production, with analysts warning that the country may only have a short window—anywhere from two to eight weeks—before it runs out of places to store its crude. If that happens, shutting down oil fields could lead to long-term damage to those reserves.
Because of the U.S. blockade on Iranian ports, Iran has been unable to export much of its oil and has been redirecting it into land-based storage facilities. According to the energy advisory firm FGE NextantECA, these storage tanks can hold about 122 million barrels of crude.
At its current output of roughly two million barrels per day, those tanks could be filled within about two months, the firm estimates. Once that capacity is reached, Iran would likely have to halt production at some oil fields. Annika Ganzeveld, Middle East Portfolio Manager for the Critical Threats Project at the American Enterprise Institute, said that stopping operations in this way can pose serious risks to the fields themselves.
Extended or sudden shutdowns can permanently damage oil reservoirs and make it much harder to restart production later at previous levels. Other analysts believe the timeline could be even shorter. Both the American Enterprise Institute and the U.K. energy analysis firm Energy Aspects estimate Iran’s effective storage capacity may be smaller, which could mean its tanks might reach their limits in as little as two weeks.
Richard Bronze, co-founder of Energy Aspects, told Reuters that the blockade might not significantly affect Iran’s production in April. However, if it continues into May, the country would likely have to sharply reduce output. In the meantime, Iran could attempt to slow production for the rest of the month or use oil tankers stationed near its ports as temporary storage in an effort to delay cuts.
Analysts at the Critical Threats Project say Iran’s limited storage options demonstrate the pressure the U.S. blockade is placing on the country.
The United States began a full blockade of Iranian ports Monday morning, stopping exports that normally travel through the Strait of Hormuz. Prior to the blockade, Iran had already largely restricted traffic through the strait, with only a small number of ships moving through the strategic oil route each day—many of them tied to Iran’s so-called shadow fleet.
With the blockade now cutting off nearly all Iranian crude exports, most of which had been heading to China, the country could face serious financial strain on an already struggling economy. At the same time, a major drop in Iran’s oil production could drive fuel prices higher around the world, adding to the roughly 12 million barrels per day already disrupted by the ongoing war.