Wood Mackenzie warns that insurance, shipowner confidence, and inbound vessel risks—not just production capacity—will dictate recovery, with Iraq facing up to nine months to restore output.
LONDON/SINGAPORE – Up to 11 million barrels per day of Middle Eastern oil production remains shut in, and a rapid restart is unlikely until shipping logistics through the Strait of Hormuz normalize, according to a stark new assessment from Wood Mackenzie.
While a two-week ceasefire has eased immediate hostilities, the bottleneck has shifted from upstream capacity to maritime transit. The initial recovery phase depends almost entirely on restoring what analysts call a “workable system” of shipping—including access to insurance, trade financing, and guaranteed safe passage for vessels entering and exiting the Gulf.
“Ballasting vessels are unlikely to enter via the Strait of Hormuz any sooner than a ‘just in time’ logistics basis, at risk of becoming trapped if hostilities resume,” said Alan Gelder, senior vice-president for refining, chemicals and oil markets at Wood Mackenzie. He added that onshore storage drawdowns remain limited by port loading capacity.
While laden tankers carrying crude have strong incentives to move quickly once security assurances emerge, inbound empty vessels pose a greater challenge. Without those ships re-entering the Gulf, the export loop cannot fully restart.
Storage Gaps and Diverging National Recoveries
As exports gradually resume, available onshore storage will determine how quickly upstream production and refining can follow. Capacity varies sharply:
- Saudi Arabia & UAE: Roughly one month of output storage, offering greater restart flexibility.
- Iraq & Kuwait: Less than two weeks of storage, leaving them more exposed to logistics delays.
Fraser McKay, head of upstream analysis at Wood Mackenzie, said shipping constraints will dominate the early recovery for several weeks, even though fields themselves could restore more than half of previous supply levels relatively quickly.
“Thereafter, different recovery profiles will emerge,” McKay said, warning that even under unconstrained conditions, Iraq could take six to nine months to return to prior output levels.
Operational Risks and a ‘Historic’ Test
Despite limited infrastructure damage in some countries, McKay cautioned against rushing. “Operators hastened by regulators and governments to restore production too rapidly will risk doing more long-term damage to foundational assets,” he said.
However, he noted an unexpected upside: the extended shut-ins amount to “the largest and longest build-up test in history,” which could improve reservoir knowledge and well deliverability over the long term.
LNG: Cargoes Freed, But No Real Shift
On the gas side, Wood Mackenzie said little has fundamentally changed for LNG supply. The ceasefire may allow 14 trapped laden LNG cargoes in the Gulf to exit the Strait of Hormuz, providing some relief, according to Tom Marzec-Manser, head of Europe gas and LNG.
But a meaningful supply recovery would require a restart of Qatar’s Ras Laffan complex—a move the consultancy says remains highly uncertain during a temporary ceasefire.
