Report: Saudi Arabia to cut production by 2 million barrels per day in response to the blockade of the Strait of Hormuz

Saudi Arabia has reduced its crude oil production by about 2 million barrels per day to approximately 8 million barrels per day amid the blockade in the Strait of Hormuz and the impact on regional supply chains, further tightening the supply expectations in the world's most critical export region. According to a Reuters report on March 13, two insiders stated that Saudi production has dropped to about 8 million barrels per day after shutting down two major offshore oil fields in the context of the Iran war, with one person indicating it is below 8 million barrels per day. The pressure on the supply side is not solely from Saudi Arabia. The International Energy Agency (IEA) reported on Thursday that Gulf oil-producing countries, including Saudi Arabia, have collectively reduced production by at least 10 million barrels per day and warned that if shipping flows do not quickly recover, losses could further expand. Iran has stated that the world should prepare for oil prices of $200 per barrel. For investors, Saudi Arabia's rapid shift from emergency production increases in February to significant production cuts highlights that the impact of the blockade on the flow of physical goods has shifted from a risk scenario to a real constraint. Two Major Offshore Oil Fields Shut Down, Pipeline Routes Restricted According to a Reuters report citing an insider, the direct reason for the production cuts is the successive shutdown of the Safaniya and Zuluf offshore oil fields. These two oil fields together produce over 2 million barrels per day, primarily of heavy and medium-heavy crude oil. Saudi Arabia is currently redirecting more oil through land pipelines to Yanbu on the Red Sea coast to bypass the Strait of Hormuz. However, the pipeline primarily transports light crude oil and cannot absorb the heavy oil released from the shutdown of the two offshore oil fields, making it difficult to fully compensate for the production loss. Significant Production Cuts, Diverging from Previous Emergency Increase Strategy The background of this production cut sharply contrasts with Saudi Arabia's previous production increase strategy. According to Reuters, in February, Saudi Arabia specifically promoted an emergency production increase plan, raising daily supply to 10.11 million barrels and daily production to 10.88 million barrels, aiming to reserve buffer space in anticipation of supply disruptions in the Middle East following U.S. and Israeli actions against Iran. Now, the production level of 8 million barrels per day means that Saudi daily supply has sharply decreased by over 2 million barrels from the February peak, with the previous emergency reserves nearly offset by the actual supply disruptions caused by geopolitical conflicts. Overall Supply in the Gulf Region Impacted, IEA Issues Warning Since the U.S. and Israel began airstrikes against Iran on February 28, Iran has blocked the Strait of Hormuz, which connects the Persian Gulf to the Arabian Sea—this narrow waterway is one of the most important oil transport routes in the world. The IEA noted in its report on Thursday that the total production cut by Gulf oil-producing countries has reached at least 10 million barrels per day. The report also emphasized that if shipping flows cannot quickly recover, production losses will continue to expand, posing profound pressure on the global energy market. Risk Warning and Disclaimer The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this is at one's own risk