New calculations from JPMorgan indicate that due to severe disparities in storage capacity among Middle Eastern oil producers, the warning window for forced production shutdowns has shrunk dramatically from "25 days" to just "3 days." By the eighth day of closure, cumulative production losses could approach 3.3 million barrels per day. Iraq's storage is critically low with only two days of capacity remaining, while four key storage tanks at a major Saudi facility have reached full capacity.

The threat of a blockade at the Strait of Hormuz is rapidly translating into a physical supply crisis much faster than previously anticipated.

Natasha Kaneva, Chief Commodities Strategist at JPMorgan, stated in a recent report that due to uneven storage capacity among Middle Eastern producers, the process of forced oil production cuts will accelerate significantly within the next three days. Cumulative shutdowns are projected to near 3.3 million barrels per day, far exceeding market expectations.

JPMorgan's latest estimates show Iraq has approximately two days of storage capacity left, while Kuwait has about 13 days. Once full, these producers will face involuntary output reductions. It is important to note that these estimates are relatively conservative and do not account for some product storage sites within the Persian Gulf or available empty Very Large Crude Carriers (VLCCs) that could be repositioned.

If the blockade persists, JPMorgan forecasts that forced shutdowns could reach approximately 3.3 million barrels per day by the eighth day (roughly three days from now), rise to 3.8 million barrels per day by the fifteenth day, and further expand to 4.7 million barrels per day by the eighteenth day. These figures pertain to crude oil only and exclude refined products.

Brent crude prices were pushed near $85 per barrel on Tuesday. An explosion on an oil tanker near the Kuwaiti coast, which caused an oil spill, further tightened market sentiment.

The threat of full storage tanks has escalated the warning timeline from "25 days" to "3 days."

Earlier this week, based on initial data showing a sharp drop in transit volumes through the Strait, JPMorgan estimated that Middle Eastern producers had a buffer window of about 25 days. This assessment was initially viewed by the market as a key risk indicator. However, subsequent country-by-country verification of actual storage capacity quickly rendered this conclusion obsolete.

JPMorgan highlighted that Iraq's situation is particularly urgent. The country has already cut production by approximately 1.5 million barrels per day, affecting the Rumaila field (the world's second-largest, with cuts around 700,000 bpd), West Qurna 2 (cuts around 460,000 bpd), and the Missan field (cuts around 325,000 bpd).

Saudi Arabia is also under pressure. As of March 1st, available storage space at the Juaymah terminal on Saudi Arabia's East Coast had narrowed rapidly. Four out of six storage tanks at the Ras Tanura refinery are reported full. This refinery had already been shut down earlier this week following an attack attributed to Iran.

The core issue lies in the severe inequality of storage capacity. Some countries possess ample storage facilities, while others have very little spare capacity. The overall average of 25 days thus masked the more acute pressure on individual nations.

Antoine Halff, Chief Analyst and co-founder of geo-analytics firm Kayrros, pointed out, "Not all storage capacity is equally important. Certain tanks are critical due to their location relative to oil fields or loading facilities. Storage facilities are not interconnected, leading to significant inefficiencies within the system."

Transportation disruptions continue, and infrastructure faces new shocks.

Transit through the Strait remains nearly halted. Aside from Iranian vessels, there are no confirmed records of crude oil tankers successfully transiting in or out of the Strait, although some ships are suspected of passing through with their transponders switched off. Reportedly, only 6 to 12 VLCCs remain available for booking, leaving very limited scope for utilizing floating storage.

Meanwhile, energy infrastructure in the Middle East continues to be targeted. A fire broke out at the UAE's Fujairah port after a drone was intercepted; the port hosts multiple refining and storage facilities. Bloomberg commodity analysts warned that an attack on any laden tanker within the Persian Gulf, even with the risk of an oil spill, could prompt producers to voluntarily halt loadings, significantly accelerating the timeline for forced production shutdowns.

Limited buffer from East-West Pipeline; potential US intervention to ensure passage.

Amid the deteriorating situation, some mitigating signals have emerged. According to Bloomberg, Saudi Arabia is moving to reactivate the East-West Pipeline to reroute crude away from the Strait of Hormuz for export via the Red Sea. Data from Saudi Aramco indicates the pipeline has a design capacity of about 7 million barrels per day. Before the conflict, it was operating at less than half capacity, theoretically leaving about 5 million barrels per day of additional potential. The Yanbu port's four main berths have corresponding loading capabilities.

However, analysts widely believe that even at full capacity, the pipeline would be insufficient to effectively compensate for the supply gap caused by a substantial blockade of the Strait.

Concurrently, there is potential for intervention by the US administration. Options reportedly include providing naval escorts for transiting vessels and government-backed war risk insurance to simultaneously reduce both physical and financial risks of passage. Nevertheless, logistical hurdles remain. JPMorgan's analysis emphasizes that speed and decisiveness are critical—as storage capacity continues to tighten, any delays will quickly translate into irreversible forced production cuts.