Strait Of Hormuz Closure Pushes Gulf Oil Inventories Towards Capacity, Pressuring Refiners
KUALA LUMPUR, March 12 (Bernama) -- The continued closure of the Strait of Hormuz following the United States (US)-Iran military escalation is pushing Gulf countries’ oil inventories toward maximum capacity, posing serious operational challenges for refiners across the region.
Rystad Energy senior vice president, Commodity Markets-Oil, Pankaj Srivastava said, with crude supply increasingly stranded in the Gulf, refiners may soon br forced to adjust operations, curtailing runs as product exports stall and directing output solely to domestic markets.
"Three key factors will determine the resilience of refining systems across the Gulf: bypassing the strait through alternate export routes, the balance of domestic product demand, and refining capacity and product exports as a ratio of current refinery runs," he said in a statement on Rystad Energy Oil Market Update.
“As of now, Bahrain and Kuwait face the highest operational risk due to their export-dependent refining systems that offer zero alternative routes.
“Production shut-ins and refining cuts will likely continue across the region as the war rages on, severely threatening two million barrels per day (bpd) of global oil supply if the strait remains impassable for the next six weeks,” he said.
Meanwhile, Brent crude spiked to US$116.50 per barrel at market open before easing to US$104.50 after news that the Group of Seven (G7) would release additional oil supply.
However, this gain represents an almost 45 per cent increase since the start of the conflict, said Pankaj.
He also said that the surge in prices has materially altered its base-case market outlook, which was published two weeks before the conflict began.
"Under the pre-war scenario, we had expected Brent to average US$60 per barrel in 2026, as the market faced a substantial surplus of 2.6 million barrels per day," he said.
Most of the impacts since the start of the conflict have been precautionary or limited in scope.
In Kuwait, Mina Al Ahmadi refinery remained operational despite debris damage, while Saudi Arabia’s Ras Tanura facility - already offline for scheduled maintenance that began in the last week of January - extended its outage window following drone attacks and a debris-related fire.
Elsewhere, Israel’s Haifa refinery shut some units to avoid damage, while Iran reported strikes near the Persian Gulf Star/Bandar Abbas port and on facilities in Tehran. Bahrain’s Sitra refinery also recorded minor damage.
The most significant operational curtailments were reported in Qatar, where liquefied natural gas (LNG) production ceased at Ras Laffan and Mesaieed.
In the United Arab Emirates, drones caused a fire at Fujairah storage tanks and ADNOC’s Ruwais complex, although the affected unit was not disclosed. Reports indicate that the Ruwais West refinery was taken offline as a precaution, with no injuries reported.
Meanwhile, Duqm refinery in Oman reported no operational impact.
-- BERNAMA