Iran is apparently running out of crude oil storage capacity, which is a new indication of economic hardship amid growing tensions between the United States and Iran. The nation has been had to bring an aging oil ship, the VLCC Nasha, out of retirement to store extra crude due to a stringent blockade limiting oil exports.
There are worries that Iran may soon have to reduce or possibly stop production as Kharg Island, the country’s main oil storage facility, approaches capacity. The situation underscores the extreme strain on Iran’s oil-dependent economy, with exports prohibited and storage facilities rapidly filling up.
According to experts, Iran has about 86 million barrels of onshore storage capacity, much of which is already occupied. Iran might only be able to store oil for roughly 22 days under the current circumstances, or up to 26 days assuming tanker availability is taken into account. However, since oil producers usually lower output before storage reaches full capacity, production cuts could start even earlier—possibly within 16 days.
According to reports, Donald Trump is the driving force behind the blockade plan, which intends to put economic pressure on Iran by halting its oil exports. Iran provides only 2% of the world’s oil supply, but disruptions in the area, particularly in the vicinity of the Strait of Hormuz, might affect a substantially bigger portion of the world’s supply, possibly 37–39%, raising the possibility of a worldwide oil supply crunch.
Regarding how long Iran can continue to produce, analysts are still at odds. Under the current circumstances, some estimates point to up to two months, but there is still a lot of uncertainty. The possibility of decreased output or a brief halt to production rises sharply if the blockage persists.
In addition to having an effect on Iran, this circumstance raises concerns about the reliability of the oil supply, price volatility, and wider economic repercussions associated with interruptions in one of the most vital energy regions in the world.
