Gulf Oil Output Seen Recovering Quickly After Strait Reopens

The Gulf oil production that was severely impacted by the Iran conflict is expected to recover within a few months after the Strait of Hormuz fully reopens. Goldman Sachs estimates that around 14.5 million barrels per day of Gulf crude output, which accounts for about 57% of pre-war supply, was offline in April due to precautionary shutdowns and stock management rather than physical damage to oilfields.

The bank's research suggests that a safe and sustained reopening of the strait would allow production to return relatively quickly, supported by spare capacity in Saudi Arabia and the United Arab Emirates. However, any recovery will be constrained by logistics and well performance, particularly due to reduced empty tanker capacity in the Gulf, which has dropped by about 130 million barrels or 50%.

The longer production remains curtailed, the slower the recovery is likely to be, Goldman said. The bank also notes that recovery prospects vary across countries, with Iran and Iraq facing greater risks due to reservoir characteristics, infrastructure challenges, and sanctions, while Saudi Arabia could ramp up output faster.