Kuwait Petroleum Company Implements "Preventive Reduction" of Oil Production and Refining

Just a quick update on some recent news regarding the Iran conflict.

Kuwait reduces oil production

As the fifth-largest oil producer in OPEC, Kuwait has cut back on oil production and refining due to slowed shipping traffic through the Strait of Hormuz. This is the latest in a series of production cuts affecting major global energy producers.

Kuwait Petroleum Corporation stated that the cut is due to “Iran’s ongoing aggressive actions against Kuwait, including threats to ships’ safe passage through the Strait of Hormuz.” An insider familiar with the plan said the reduction started on Saturday, at 100,000 barrels per day, with potential for gradual increases depending on inventory levels.

These cuts join other Middle Eastern countries reducing energy supplies, pushing London oil prices to their highest close in over two years, nearing $93 per barrel. Iraq earlier this week also began reducing output as transportation through the Strait of Hormuz nearly halted, with oil storage filling rapidly. Saudi Arabia shut down its largest refinery after a drone attack, while Qatar closed the world’s largest liquefied natural gas export plant.

Kuwait produces about 2.57 million barrels of oil daily in January. Its only export route is through the Strait of Hormuz. Saudi Arabia, the region’s largest oil producer, has shifted some supplies away from this route, exporting via the Red Sea’s Yanbu port.

Analysts say the market is still underestimating the long-term impact of closing the Strait of Hormuz and predict that if the conflict shows no signs of easing, oil prices could reach $100 within days. “Once the market accepts that the closure of the Strait of Hormuz could last weeks rather than a short disruption, we expect Brent prices to rise to $100 or even higher in the coming days to weeks.”

Other news

Iran’s Fars News Agency reports that the Islamic Revolutionary Guard Corps (IRGC) attacked the U.S. base at Jufair in Bahrain, in retaliation for the earlier attack on Iran’s Gasham Island desalination plant.

Iranian Foreign Minister Araghchi previously stated that the U.S. attacked facilities on Gasham Island and warned of “serious consequences.”

According to the IRGC on the 7th, an Iranian expert meeting will be held within the next 24 hours to select Iran’s Supreme Leader.

Iran’s Tasnim News Agency quoted a military spokesperson saying Iran “welcomes escorting oil tankers and the U.S. claims to send troops to ensure passage through the Strait of Hormuz, and we await their arrival.”

The spokesperson added, “We advise the U.S. to remember the 1987 incident when the supertanker Bridgeton was burned, as well as recent attacks on oil tankers.” In 1987, the IRGC attacked a tanker named Bridgeton in the Persian Gulf while it was under U.S. escort.

(Source: China Fund News)