When will oil production recover? - Goldman Sachs: Within a few months after the reopening of Hormuz
Oil production in the Persian Gulf, severely constrained by the Iran conflict, could recover within a few months once the Strait of Hormuz is fully reopened, but it could take much longer, Goldman Sachs said.
The bank estimated that about 14.5 million barrels per day of Gulf crude production – about 57% of pre-war supply – was out of service in April, largely due to pre-emptive shutdowns and inventory management, rather than physical damage to oil fields.
The Strait of Hormuz processes about a fifth of global oil flows under normal conditions, so a prolonged outage has significant consequences for global energy markets.
Goldman said in a research note that a safe and stable reopening of the strait in the absence of repeated attacks on oil infrastructure would allow production to return relatively quickly, supported by spare capacity in Saudi Arabia and the United Arab Emirates.
However, any recovery will be limited by logistics and well performance. Available empty tanker capacity in the Persian Gulf has fallen by about 130 million barrels, or 50%, limiting the speed at which producers can move oil once exports resume, the bank said.
Prolonged well shutdowns also risk reducing flow rates, especially in low-pressure reservoirs, requiring preliminary repairs before production can fully return. The longer production remains constrained, the slower the recovery is likely to be, Goldman said.
The prospects for recovery vary across countries, with Iran and Iraq facing greater risks due to reservoir characteristics, infrastructure challenges and sanctions, while Saudi Arabia could ramp up production more quickly, the bank said.
An average of forecasts from outside agencies suggests that Gulf producers could recover about 70% of lost output within three months and about 88% within six months, Goldman said, while warning that a prolonged shutdown increases the risk of long-term supply damage.
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