Kuwait Shuts Production, Qatar Warns Oil Could Hit $150 in Weeks

Supply Disruption Intensifies

The global oil market is facing increasing turbulence as key Middle Eastern producers grapple with the fallout from ongoing regional instability. Qatar's Energy Minister, Saad al-Kaabi, recently stated in an interview with the Financial Times that crude prices could skyrocket to $150 per barrel within a matter of weeks should the Strait of Hormuz, a critical chokepoint for oil tankers, remain inaccessible.

Adding to the supply-side pressures, Kuwait, a founding member of OPEC, has reportedly initiated production shutdowns at some of its oilfields. This action stems from a growing inability to store crude oil, with the Strait of Hormuz effectively closed to tanker traffic. Sources suggest that Kuwait is also contemplating further reductions in both production and refining operations to align with domestic demand.

Force Majeure Looms for Gulf Exporters

Al-Kaabi, who also serves as the president and CEO of QatarEnergy, indicated that nearly all major oil and gas exporters in the Middle East are poised to declare force majeure on exports within days if the Strait of Hormuz remains closed. This follows QatarEnergy's earlier suspension of LNG production at its Ras Laffan hub, the world’s largest LNG complex, and subsequent issuance of force majeure notices to buyers after a drone attack and the near-total halt of tanker traffic through the critical waterway.

"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.

Data from the Joint Maritime Information Center reveals a dramatic decline in vessel traffic through the Strait of Hormuz, plummeting from an average of 138 ships per day to a mere two in the 24 hours leading up to Thursday. Notably, neither of these vessels were tankers, highlighting the severity of the disruption.

Economic Repercussions and Recovery Timeline

The disruption has left dozens of tankers stranded near Hormuz, some of which have been targeted in attacks. The withdrawal of war insurance by insurers has further exacerbated the paralysis of energy trade in the region. While the U.S. government has suggested providing insurance coverage, its impact remains to be seen.

Al-Kaabi also warned that a prolonged conflict could severely impact global economic growth. Even if hostilities were to cease immediately, Qatar anticipates needing “weeks to months” to restore normal energy delivery schedules.

The potential for a sustained disruption to oil supplies through the Strait of Hormuz raises concerns about a significant price shock and broader economic consequences, underscoring the region's vital role in global energy markets. Market participants are closely monitoring developments for any signs of de-escalation or alternative supply routes.