Oil prices could soar to as much as $150 per barrel within two to three weeks if the critical Strait of Hormuz remains off limits for tankers, Qatar’s Energy Minister Saad al-Kaabi told the Financial Times in an interview published on Friday.
That proclamation came just a few short hours before reports that Kuwait—one of the founding members of OPEC—had begun shutting in oil production at some oilfields as there just simply isn’t anywhere to store any more oil with the Strait of Hormuz still at a standstill. According to sources familiar with the matter, Kuwait is also discussing cutting production even further, and refining operations as well, to levels that would match what would be needed domestically.
Kuwait’s production outages has not yet been quantified.
All major oil and gas exporters in the Middle East are set to declare force majeure on exports within days if the vital shipping lane remains de facto closed to tanker traffic, said al-Kaabi, who is also president and CEO of QatarEnergy.
Qatar’s state energy firm earlier this week halted LNG production at its Ras Laffan hub, the world’s largest LNG complex, and later issued force majeure notices to buyers, following a drone attack at the facility and the all but halted tanker traffic through the Strait of Hormuz.
Vessel traffic through the Strait of Hormuz has crashed from an average of 138 ships a day to just two in the 24 hours to Thursday, the Joint Maritime Information Center has reported. The center noted that neither of the two vessels that passed the Strait were tankers.
There are several dozen tankers stranded near Hormuz, some have become the target of attacks, and insurers have pulled war insurance, contributing to the paralysis of energy trade in the world’s biggest oil-producing region. Announcements by the U.S. president that the federal government would step in to provide insurance coverage have yet to have an effect.
“Everybody that has not called for force majeure we expect will do so in the next few days that this continues. All exporters in the Gulf region will have to call force majeure,” Qatar’s al-Kaabi told FT.
The official also predicted that if the war continues for a few weeks, global economic growth would suffer.
But even if the war were to end today, Qatar would likely need “weeks to months” to return to a normal schedule and cycle of energy deliveries, al-Kaabi said.
By Michael Kern for Oilprice.com
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