Oil prices surge as Kuwait cuts output amid Hormuz tensions
Production cut of 100,000-120,000 bpd adds to supply concerns as Iran's shipping threats drive crude to $94
Brent crude prices surged to nearly $94 per barrel on Friday as Kuwait announced a precautionary reduction in oil output, adding to supply disruptions caused by escalating tensions in the Strait of Hormuz.
The Kuwait Petroleum Corporation said it would cut production by 100,000 to 120,000 barrels per day starting in March, citing "ongoing aggression by the Islamic Republic of Iran" and threats against safe passage through the strategic waterway. Kuwait typically produces around 2.5 million to 2.6 million barrels per day, making it one of OPEC's mid-sized producers.
The production cut comes as storage facilities across the Persian Gulf region approach capacity limits. Kuwait's domestic storage has reached approximately 98% capacity, while facilities in Saudi Arabia and the United Arab Emirates are also filling rapidly and expected to reach their limits within weeks.
The Strait of Hormuz, which separates the Persian Gulf from the Gulf of Oman and Arabian Sea, handles approximately 20.9 million barrels per day of oil flow—or roughly one-fifth of global oil consumption. Iran has effectively disrupted transit through the chokepoint since March 2, trapping crude in the region and forcing other Gulf producers to take similar measures.
Iraq has also curbed production, while Saudi Arabia has halted operations at its largest refinery and Qatar has shut down its largest liquefied natural gas export facility following drone attacks. The combined disruptions have sent Brent crude soaring 17.2% this week to nearly $94 per barrel, with West Texas Intermediate trading above $90 per barrel.
The supply shock reverses earlier expectations of a 2026 global oil surplus, creating upside for U.S. oil producers that had been preparing for a year of potential oversupply. Major integrated energy companies and shale producers are positioned to benefit from the sudden price rally, though investors remain watchful for any escalation that could further constrain supply through the vital waterway.
Kuwait Petroleum Corporation described its production adjustment as temporary and part of its "risk management and continuity of business strategy," stating it remains ready to resume full output when conditions permit. However, with regional storage constrained and shipping routes threatened, the near-term outlook points to sustained elevated crude prices and continued pressure on global oil markets.