Middle East crude oil "production halt wave": UAE and Kuwait announce production cuts

The near-blockade of the Strait of Hormuz is triggering a chain reaction of production cuts among Middle Eastern oil-producing countries, putting severe pressure on global energy supplies.

Abu Dhabi National Oil Company (Adnoc) and Kuwait Petroleum Company have successively announced production cuts. The former stated that it is "adjusting offshore production levels to meet storage needs," while the latter explicitly attributed the production cut to "Iran's threats to the safe passage of ships through the Strait of Hormuz."

This wave of production cuts has pushed Brent crude oil prices to their highest closing price in more than two years, breaking above $93 per barrel, thus increasing global inflationary pressures. Wallstreetcn previously reported that JPMorgan said the "wave of shutdowns" among Middle East oil-producing countries is quickly spreading, and once a full shutdown occurs, oil prices may soar by $30.

Previously, Iraq began limiting production earlier this week due to storage tanks reaching capacity, Saudi Arabia's largest refinery shut down after being hit by a drone strike, and Qatar's global largest liquefied natural gas export facility has also stopped operations. The production cuts by the UAE and Kuwait are the latest set of emergency measures by Middle Eastern oil-producing countries.

Kuwait declares force majeure, production cuts expected to expand to 300,000 barrels/day

Kuwait Petroleum Company has officially declared force majeure (a legal clause that relieves companies of contractual obligations under uncontrollable circumstances) covering the sale of oil and refined oil products.

According to Bloomberg, citing informed sources, Kuwait's production cuts began earlier Saturday at roughly 100,000 barrels per day and are expected to triple on Sunday; future cutbacks will depend on storage levels and the situation in Hormuz.

Kuwait's crude oil output in January was about 2.57 million barrels per day. Since the country's export channels depend solely on the Strait of Hormuz, a continued blockade could deplete its storage space within weeks or even days.

Kuwait had already taken the lead in lowering refinery processing loads, with its Al-Zour, Mina Al-Ahmadi, and Mina Abdullah refineries having a combined daily processing capacity of about 1.4 million barrels. Al-Zour refinery is one of the largest oil processing facilities in the Middle East.

UAE announces adjustment of offshore production to meet storage needs

As the third-largest oil producer in OPEC, the UAE's daily output in January exceeded 3.5 million barrels. Abu Dhabi National Oil Company (Adnoc) announced that it is "adjusting offshore production levels to meet storage needs." The UAE has an alternative route bypassing the Strait of Hormuz, but it cannot fully substitute Hormuz as an export channel.

Adnoc operates a pipeline with a daily capacity of 1.5 million barrels leading directly to the UAE's western Fujairah port, enabling partial exports when the Strait is blocked. Adnoc said that its onshore operations are currently normal and it is leveraging international storage facilities to ensure global supply.

Saudi Arabia, the region's largest oil producer, has also rerouted some crude to the Red Sea port of Yanbu in order to avoid the risks associated with Hormuz.

The Hormuz blockade hits global energy markets

The Strait of Hormuz is a vital chokepoint connecting the Persian Gulf to open waters, and a core channel for global crude oil export. Due to Middle Eastern warfare and Iran's threats against passing ships, the waterway has become nearly closed, severely obstructing exports from the world's most important oil-producing region.

London Brent crude oil futures closed at $93 per barrel, reaching a new two-year high, prompting consumer countries to seek alternative supply sources and worsening global inflation risks.

The UAE, Kuwait, and other Gulf states have become primary targets for Iranian missiles and drones in the current conflict. The U.S. Embassy in Kuwait was attacked, the U.S. Consulate in Dubai was listed as a target, and infrastructure in both countries sustained significant damage.

Trump: Oil prices will eventually fall

U.S. President Trump was interviewed by reporters aboard Air Force One on Saturday. When asked if he was concerned about gasoline prices, Trump replied: "Not worried."

Trump predicted oil prices would fall sharply after the war ends. He characterized the conflict as "a small-scale operation" and said it "might last for some time."

"We anticipated the oil price rise and it indeed went up," Trump said. "But prices will also come down, and they will come down very quickly."

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