Saudi Output Drops Sharply As Gulf War Disrupts Oil Arabian Post

(MENAFN- The Arabian Post) Arabian Post Staff -Dubai

Saudi Arabia has cut crude oil production by about two million barrels per day after shutting down major offshore fields as conflict around Iran disrupts shipping through the Strait of Hormuz, forcing the world’s largest exporter to scale back output and reroute supplies.

Production has fallen to around eight million barrels per day, down from more than 10 million barrels per day earlier this year, according to industry officials familiar with the situation. The reduction follows the closure of the Safaniya and Zuluf offshore fields, two of the kingdom’s largest sources of heavy and medium crude. Together they account for more than two million barrels per day of capacity, making their suspension one of the most significant supply cuts in the global oil market during the ongoing regional conflict.

Energy markets have been shaken by the escalating confrontation involving Iran, which intensified after United States and Israeli airstrikes on Iranian targets on February 28. Retaliatory actions and heightened maritime threats in the Persian Gulf have effectively halted tanker traffic through the Strait of Hormuz, the narrow shipping route between Iran and Oman through which roughly one fifth of global oil supplies normally pass.

With tanker movements severely restricted, Gulf producers have been forced to curtail output because oil cannot be exported quickly enough. Storage facilities across the region have filled rapidly as shipments slowed, prompting operators to shut wells and reduce production to avoid logistical bottlenecks.

Saudi Arabia has sought to mitigate the disruption by redirecting some crude shipments to the Red Sea port of Yanbu, connected to eastern oilfields by pipeline infrastructure. The route allows exports to bypass the Gulf chokepoint, though it mainly handles lighter grades of crude and cannot fully compensate for the volumes normally shipped through the Strait of Hormuz.

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Energy analysts describe the production cut as a reflection of the extraordinary operational challenges facing Gulf producers. Large offshore installations in the eastern Gulf depend heavily on tanker loading facilities in the region, meaning that when maritime traffic stalls, producers quickly encounter storage and transport constraints.

The Safaniya field alone is widely regarded as the largest offshore oilfield in the world. Its suspension, along with Zuluf, has therefore removed a significant amount of heavy crude from global supply chains, tightening availability for refineries that rely on these grades.

The broader regional supply shock has been even larger. The International Energy Agency estimates that oil producers across the Gulf - including Saudi Arabia, Iraq, Kuwait, Qatar and the United Arab Emirates - have collectively reduced output by at least ten million barrels per day as the conflict disrupts shipping and energy infrastructure.

Market reactions have been swift. Oil prices have surged amid fears that prolonged fighting or damage to energy infrastructure could trigger a severe global supply shortage. Analysts warn that extended disruption to Gulf exports could push prices dramatically higher, especially if additional fields or terminals are forced offline.

Tehran has warned that oil prices could climb as high as $200 per barrel if the conflict deepens and the Strait of Hormuz remains closed. The threat underscores the geopolitical leverage of the waterway, a narrow maritime corridor that serves as the main export route for several of the world’s largest oil producers.

Global energy traders are closely monitoring the evolving situation, particularly the possibility that further attacks on infrastructure could escalate the crisis. Strikes on tankers, drones targeting energy facilities and missile attacks on military installations across the region have already heightened the risk environment for shipping and production operations.

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Damage to Iranian export infrastructure has also added to uncertainty in the market. Kharg Island, the primary hub for Iranian crude exports, has been targeted during the conflict and handles the majority of Tehran’s oil shipments. Disruptions at the facility could remove additional volumes from the market and intensify supply shortages.

Refining sectors in Asia have begun adjusting to the tightening supply conditions. Some refiners have reduced processing rates because of reduced availability of Middle Eastern crude, while governments are examining strategic reserves to cushion domestic fuel markets.

The supply shock is unfolding against a backdrop of already fragile energy markets. Oil demand has remained strong across Asia and other developing regions, leaving limited spare capacity to absorb sudden disruptions of this scale.

Saudi Arabia’s decision to shut down major offshore fields highlights how geopolitical tensions can quickly ripple through the global energy system. While the kingdom still holds significant spare capacity under normal conditions, logistical constraints created by blocked shipping lanes have effectively neutralised part of that buffer.

Also published on Medium.

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