Middle East Oil Supply Recovery Delayed as Tensions Escalate

Despite a brief recovery in oil production in the Middle East Gulf region, supply outages have climbed again as traffic through the Strait of Hormuz has slowed. According to estimates, current production outages near 9 million barrels per day (Mbd). The UAE, however, remains an exception with zero outages.

The country's ability to bypass large volumes via the ADCOP pipeline and STS transfers in the Gulf of Oman has allowed it to return to pre-war crude and condensate production levels above 4 Mbd in June. Kpler data shows UAE crude exports trending above 3 Mbd so far in July, in line with year-ago volumes.

The Middle East oil supply outages have been pushed back due to the renewed escalation between the US and Iran, leading to a prolonged-conflict scenario. As a result, most MEG countries are expected to continue producing at subdued levels through late this year. Specifically, after MEG production fell from pre-war volumes of 27 Mbd to a low of 15 Mbd in May, it recovered to an average of 19.4 Mbd in July.