Kuwait suspends oil contracts again as Strait remains blocked
Kuwait has extended a force majeure declaration that now covers about 2 million barrels a day of crude and refined products as the Strait of Hormuz shutdown blocks tanker traffic.
The move lets state-owned Kuwait Petroleum Corp. suspend delivery obligations it can’t meet under current conditions. This isn’t new – KPC had already declared force majeure earlier in the conflict – but the latest notice expands it across the country’s export system as disruptions drag on, Bloomberg reports.
The bottom line is that Kuwait can’t load or ship oil, cutting off flows worth roughly $150 million to $180 million a day at current prices and throwing delivery schedules into disarray.
While other Gulf producers are also dealing with export disruptions, Kuwait is especially vulnerable because almost all of its oil has to pass through Hormuz, with few alternative routes.
Kuwait has suffered repeated hits to its oil infrastructure, and output is now at levels last seen in the early 1990s after the Iraqi invasion. The latest notice to customers, which was delivered late last week, takes into account that full operations will take time to recover once hostilities ease, according to Bloomberg.
Energy agency weighs record oil release as Iran tensions mount
Governments around the world are scrambling to contain the escalating shock to energy markets from the Iran war, with oil traders tracking disruptions to Gulf exports and tanker traffic as officials weigh emergency measures to stabilize supplies.
Officials from the International Energy Agency are discussing what could be the largest coordinated release of strategic oil reserves in history – about 300 million to 400 million barrels – far exceeding the 182 million barrels released in 2022 after Russia’s invasion of Ukraine, Bloomberg reports.
Saudi Arabia, the UAE and other Gulf producers are assessing how much crude they can continue exporting as tanker insurers and shipping companies review the risks of operating in the region.
Many cargoes have been delayed and freight rates for vessels willing to enter the Gulf have surged as the conflict intensifies.
At the same time, officials are studying whether alternative routes – including Saudi pipelines that bypass the Strait of Hormuz and export terminals on the Red Sea – can help keep oil moving if shipping disruptions worsen, The Wall Street Journal reports.
The U.S. and its allies are also discussing naval measures to safeguard commercial traffic through the Gulf.
Energy traders say the combination of possible supply outages, tanker disruptions and a record emergency stockpile release has turned the oil market into a day-to-day calculation of how quickly governments can offset the barrels at risk from the conflict.
