The Organization of the Petroleum Exporting Countries (OPEC) released its latest monthly report on Monday, revealing that oil production fell by 27 percent in March due to Iran using terrorist threats to close the Strait of Hormuz.
According to OPEC’s report, production was down by 7.88 million barrels per day (mb/d) in March, an even bigger oil shock than the 6.98 mb/d loss from the Wuhan coronavirus pandemic in May 2020.
It is also much larger than the five-percent monthly production cut voluntarily undertaken by OPEC in 1973 to punish supporters of Israel for the stunning defeat of attacking Arab powers in the Yom Kippur War — a cut that triggered a major fuel crisis in the United States which was much more dependent upon OPEC for oil at the time.
The largest percentage drop in production for an OPEC nation was reported by Iraq, which saw a 61 percent decline in March, followed by Kuwait with 51 percent and the United Arab Emirates (UAE) with 45 percent.
Saudi Arabia saw the largest decline in absolute volume, losing about 2.31 mb/d, but its normal production is so much larger than the others that its losses were smaller as a percentage. The Saudis were able to work around the Strait of Hormuz closure to a limited degree by shifting oil to ports on the Red Sea with their cross-country pipeline network.
The lost output came at a delicate moment for several OPEC members because they only recently began ramping production back up after voluntary cuts imposed in 2023 to shore up the price of oil.
The OPEC report did not directly mention the Iran conflict, instead euphemistically referring to “geopolitical developments” that should be “closely monitored” as the reason for the slowdown. The report was optimistic that, barring further crises, lost production would be recovered quickly after the Strait of Hormuz opens and the damage from Iranian missile attacks on oil infrastructure in the other Gulf states is repaired.
OPEC also noted a reduction in worldwide oil demand of about 500,000 barrels per day, driven by “slight transitory weakness in oil demand growth, given ongoing developments in the Middle East.”
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