Gulf Production Recovery Could Take Months, Supply Risks Still Pressure Oil!
Crude oil production in the Persian Gulf, disrupted by the Iran war, is expected to take "several months" to largely recover, assuming the Strait of Hormuz is fully opened and there are no new attacks, according to Goldman Sachs. This assessment emphasizes that supply recovery is not just a matter of political decisions to open shipping lanes, but also operational readiness on the ground.
Goldman estimates that in April, the region's output was cut by around 14.5 million barrels per day, or 57%. This scale of the disruption suggests that the effects of the conflict have penetrated physical supply levels, not just market sentiment, so the market is likely to maintain a risk premium while signs of normalization remain unclear.
The breakdown of the cuts Goldman estimates includes a reduction of around 4 million bpd in Saudi Arabia, 3 million bpd in Iraq, 2.5 million bpd in Iran, 2.7 million bpd in the UAE, 1.2 million bpd in Kuwait, and 1 million bpd in Qatar. These figures reflect widespread disruptions across major producers, so recovery is typically gradual.
According to Goldman, the longer Hormuz remains effectively closed, the longer the cuts will last and the slower the production recovery. Reasons include the potential for additional work at wells, shortages in the procurement of inputs such as pipe and materials, and transportation constraints that hamper the normalization of the energy supply chain.
Nevertheless, Goldman believes there is still a basis for a "solid" recovery if physical damage to the field is limited. They highlight Saudi Aramco's projection that production increases can be implemented relatively quickly, as well as the opportunity for Saudi Arabia and the UAE to utilize spare capacity. In a ramp-up scenario, key constraints shift to technical factors such as well flow rates and transport capabilities, which are heavily influenced by pipeline capacity, material and labor availability, and reservoir complexity.
Looking ahead, the oil price outlook is likely to remain volatile and sensitive to two drivers: the reopening status of Hormuz and the speed of production/transport recovery. If Hormuz is fully restored and the ramp-up proceeds smoothly, price pressures could potentially ease gradually. However, if the shutdown is prolonged or the recovery is stalled, Goldman believes the final recovery phase could be significantly longer or incomplete, thus maintaining a bias in oil prices supported by supply risks over a period of several months. (asd)
Source: Newsmaker.id*
