Prolonged Mideast crisis could shut oil output itself

Commercial ships are anchoring off the coast of the United Arab Emirates amid navigation disruptions in the Strait of Hormuz. US-Israel strikes on Iran threaten the waterway that carries about one-fifth of the worlds oil, and a prolonged closure could fill storage tanks and force Gulf producers to stop pumping.

Daan Struyven, head of oil research at Goldman Sachs, warned that if the conflict drags on and export routes remain blocked, producers could be forced to halt production as storage fills up. "If the Strait of Hormuz is closed for a very long time, you cannot draw inventories forever, and the market may have to rebalance by incentivizing prices to such high levels that you generate demand destruction," he said.

Brent and US West Texas Intermediate futures were about 3% and 2.4% higher at around $80 and $73 per barrel, respectively, and both grades are up about 30% this year. The Middle East accounts for about one-third of the worlds seaborne crude, but storage capacity, pipelines, and tanker alternatives are not unlimited.

United Arab Emirates, Middle East

hormuz strait, uae, navigation disruptions, oil exports, storage capacity, gulf producers, goldman sachs, brent, wti, demand destruction