Closure of the Strait of Hormuz Halves UAE Crude Oil Production, Intensifies Middle East Supply Disruption

⑴ Two sources revealed on Monday that due to the Iran conflict and the effective closure of the Strait of Hormuz, the UAE state-owned oil giant ADNOC was forced to carry out large-scale production shutdowns, resulting in the UAE’s daily oil output dropping by more than half. This maritime chokepoint is typically used to transport about one-fifth of the world’s oil supply. ⑵ According to people familiar with the matter, the shutdown involved the temporary closure of oil wells, affecting both onshore and offshore operations. ADNOC previously stated it was cutting offshore production, while sources disclosed that currently all offshore production has ceased. According to data reported to OPEC, the UAE’s daily output in January was slightly below 3.4 million barrels, accounting for more than 3% of global demand, making it the third largest oil producer in the organization. ⑶ Specifically, before the conflict, ADNOC’s Upper Zakum crude oil exports were slightly above 1 million barrels per day, Das Blend crude oil exports were slightly below 700,000 barrels per day, and Umm Lulu oil field exports were about 230,000 barrels per day. In February, onshore Murban crude oil exports jumped from 1.135 million barrels per day in January to about 1.5 million barrels per day, but are now severely affected. ⑷ Earlier on Monday, a fire broke out in the oil industrial area of Fujairah Port due to a drone attack, suspending oil loading and unloading operations, which later resumed. The port is a major oil bunkering and storage center located outside the Strait of Hormuz in the Gulf of Oman, and had just resumed operations on Sunday after another attack over the weekend. ⑸ Analysts estimate that the total oil production reduction in the Middle East is currently between 7 million and 10 million barrels per day, accounting for 7% to 10% of global demand. Among them, OPEC’s largest oil producer Saudi Arabia has cut production by about 20%, and the second largest member Iraq has reduced output by about 70%. The scale of supply disruptions continues to expand, posing a severe shock to the global energy market.