①Goldman Sachs expects that Gulf oil production will recover within a few months after the reopening of the Strait of Hormuz, although it may take longer; ②The bank estimates that approximately 14.5 million barrels per day of crude oil production in the Gulf region was shut down in April, mainly due to precautionary shutdowns and inventory management; ③Goldman Sachs also noted that production recovery will be constrained by capacity and well performance, with varying prospects for different countries.
Goldman Sachs stated on Thursday (April 23) that Gulf oil production, which was significantly reduced due to the conflict with Iran, is expected to largely recover within a few months after the full reopening of the Strait of Hormuz, though it may take longer.
The bank estimates that about 14.5 million barrels per day of crude oil production in the Gulf region (approximately 57% of pre-war supply) was shut down in April, primarily due to precautionary measures and inventory management rather than actual damage to the oil fields.
Under normal circumstances, the Strait of Hormuz handles about one-fifth of global oil transportation. Therefore, prolonged disruptions to the strait would have a significant impact on global energy markets.
Recovery speed
In its latest research report, Goldman Sachs stated that if the Strait of Hormuz is safely and continuously reopened without further attacks on oil infrastructure, production will recover relatively quickly, supported by Saudi Arabia and the UAE's spare capacity.
However, any recovery will be constrained by capacity and well performance. Goldman Sachs noted that available empty tanker capacity in the Gulf region has dropped significantly by about 50% (approximately 130 million barrels), limiting producers' ability to transport oil after resuming exports.
Additionally, prolonged well closures may reduce flow rates, particularly in low-pressure reservoirs, requiring workovers to fully restore production. Goldman Sachs indicated that the longer production constraints persist, the slower the recovery may be.
The bank also pointed out that recovery prospects vary by country. Iran and Iraq face greater risks due to reservoir characteristics, infrastructure challenges, and sanctions, while Saudi Arabia may be able to increase production more quickly.
Goldman Sachs noted that external agency forecasts indicate Gulf oil producers may recover about 70% of lost production within three months and approximately 88% within six months, but warned that prolonged shutdowns could cause lasting damage to supply.
Editor/KOKO