Hormuz crisis: 600,000 bpd of Middle East oil still offline until 2027
The U.S. Energy Information Administration (EIA) now expects that roughly 600,000 barrels per day (bpd) of Middle East oil production will remain shut in through the end of 2027, even as most regional output recovers to near pre-conflict levels by early next year. The longer-than-expected closure of the Strait of Hormuz, triggered by renewed tensions in late July, continues to reshape global oil supply and price forecasts.
In its latest Short-Term Energy Outlook (STEO), published on Tuesday, the EIA projects that Hormuz traffic will remain severely constrained through August, with flows slowly increasing from September. Most Middle East producers are expected to return to near-normal output in early 2027, but a residual 600,000 bpd will stay offline through the end of that year, the agency said.
What is driving the prolonged oil shut-ins?
The EIA attributes the extended disruption to the ongoing conflict in the region, which has cut oil shipments through the Strait of Hormuz to a two-month low. The agency estimates that shut-ins among Middle East producers averaged 5.5 million bpd in July, down from 10.1 million bpd during the March-May period, but still substantial. For the third quarter, shut-ins are now projected at an average of 6.72 million bpd, higher than the July forecast.
Notably, the EIA does not believe that Houthi threats to ships carrying Saudi crude through the Bab el-Mandeb Strait have caused additional production cuts. The agency's outlook assumes that the current constraints will ease gradually, but warns that some Gulf producers will not fully restore output within the forecast period.
How are Gulf producers responding to the crisis?
The United Arab Emirates (UAE), which left OPEC on May 1, stands out as an exception. It fully restored its crude production by June and has boosted exports to pre-crisis levels. Abu Dhabi National Oil Company (ADNOC) has offered nearly 100 million barrels of crude in spot tenders since June, using workarounds such as shuttling crude through Hormuz for loading on larger vessels outside the Strait, maximizing its onshore pipeline to bypass the waterway, and shipping tankers in dark mode.
Other Gulf producers remain constrained. As of July, Saudi Arabia had 2.3 million bpd shut in, Iraq 1.96 million bpd, and Kuwait 1.05 million bpd. The EIA expects shut-ins to ease to 1.68 million bpd by the first quarter of 2027, but the residual 600,000 bpd will persist through the end of the year.
What does this mean for oil prices?
The EIA has raised its third-quarter Brent crude forecast by $11 per barrel to an average of $85, reflecting lower supply and depleted global inventories. Early on Wednesday in Asian trade, Brent was already trading near $89 per barrel, amid fading hopes of U.S.-Iran talks to reopen the Strait of Hormuz.
The price outlook remains highly sensitive to geopolitical developments. As the EIA notes, any re-escalation or de-escalation could quickly change the oil flow picture, as it has done repeatedly over the past five and a half months.
FAQ
How long will Middle East oil production remain disrupted?
Most production is expected to return to near pre-conflict levels by early 2027, but about 600,000 bpd will remain offline through the end of 2027, according to the EIA.
Which countries are most affected by the shut-ins?
Saudi Arabia, Iraq, and Kuwait have the largest shut-ins, while the UAE has fully restored production and boosted exports.
Why has the EIA raised its oil price forecast?
The EIA increased its Q3 Brent forecast by $11 to $85 per barrel due to prolonged Hormuz constraints and lower supply.
For Namibia, a net oil importer, these developments could have direct implications for fuel prices and inflation. The country's ongoing efforts to diversify its energy mix and invest in renewables become more urgent as global oil markets remain volatile. The Namibian government and businesses should monitor these trends closely, as sustained high oil prices could affect the cost of living and economic growth.
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