(Bloomberg) — The United Arab Emirates and Kuwait have begun cutting oil production, as the imminent closure of the Strait of Hormuz ripples through energy markets and affects global supply.
Abu Dhabi National Oil Company is “managing offshore production levels to meet storage requirements,” the company said in a statement, without elaborating. Kuwait Petroleum Co. said it is cutting production at its oil fields and refineries following Iranian threats to the safe passage of ships through the Strait of Hormuz.
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The war in the Middle East has blocked the Hormuz, a narrow waterway that connects the Persian Gulf to the open sea, after threats to Iranian shipping to maritime transport. That halted exports from the world’s top oil-producing region and helped push prices in London to nearly $93 a barrel in two years, sending consumers scrambling for alternatives and threatening to raise global inflation.
Kuwait’s oil cuts began at 100,000 barrels a day on Saturday and are expected to nearly triple on Sunday, with more gradual cuts depending on stock levels and the situation in Hormuz, said a person with direct knowledge of the plan, speaking on condition of anonymity because the details are private.
The UAE, which in January was OPEC’s third-largest producer pumping more than 3.5 million barrels per day, uses export capacity that runs through the Strait of Hormuz and its international storage facilities to ensure supplies to global markets. ADNOC operates a 1.5 million barrel per day pipeline to Fujairah on the UAE’s west coast to avoid the strait. Adnok said its operations on the coast continued as normal.
The cuts by the two OPEC members follow other cuts in the region. Iraq halted production earlier this week as storage tanks began to fill, while Saudi Arabia shut down its largest oil refinery and Qatar shut down the world’s largest liquefied natural gas exporter after drone strikes.
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Kuwait Petroleum has declared force majeure — a legal provision that prevents the company from meeting contractual obligations due to circumstances beyond its control — on sales of oil and refining products, according to a notice seen by Bloomberg.
