Iran has been compelled to stockpile crude oil on tankers as a US naval blockade severely curtails its exports, with onshore storage facilities reaching capacity, according to shipping data and analysts. The blockade, part of heightened tensions in the Gulf, has significantly reduced Tehran's ability to sell oil, its primary revenue source.
Sharp Decline in Exports
Between 13 and 25 April, only a handful of carriers transporting Iranian crude left the Gulf of Oman, marking an over 80% decline from a comparable period in March, when Iran exported 23.4 million barrels. Some vessels have been intercepted by US forces after departing Iranian ports, and tracking systems have been switched off on some ships, making exact measurement of deliveries, especially to China, impossible.
Market Impact
The loss of Iranian supply adds to wider market tightness as the war has effectively closed the Strait of Hormuz, curtailing oil exports from Saudi Arabia, the UAE, Kuwait, and Iraq, driving prices higher. Benchmark Brent crude futures have jumped by about $50 a barrel since the Iran war began on 28 February, raising prices of gasoline, diesel, and jet fuel. The International Energy Agency has called it the world's largest oil output disruption.
Last month, the US granted Tehran an unexpected temporary sanctions waiver on energy exports to allow prices to cool.
Blockade Details
US authorities said their blockade was denying Tehran of much-needed revenue from crude exports. US Central Command stated on Wednesday that 41 tankers holding 69 million barrels of oil cannot be sold by the Iranian regime. Iran's currency, the rial, fell to a record low against the US dollar on Wednesday, highlighting financial difficulties.
Despite the pressure, Iran is still loading crude at its main export hub on Kharg Island. Satellite imagery shows at least 10 tankers parked off Iran's Chah Bahar port on the Gulf of Oman.
Production Constraints
Iran pumped about 3.24 million barrels per day (bpd) of crude in February, around half for domestic refining. However, the country may be forced to start cutting output within a week or two due to scant storage. Onshore storage is about 60% full, with stocks above 50 million barrels and capacity at 86 million barrels. Consultancy FGE NextantECA estimated on 15 April that capacity constraints could force Iran to curb production in mid-June.
