Exports Bottlenecked at Hormuz as Storage Tanks Near Critical Limits; OPEC’s Second-Largest Producer Cuts Output by 80%

According to media reports citing Iraqi energy officials, Iraq’s oil production has plummeted as the conflict in Iran persists. Domestic storage facilities have reached critical capacity thresholds, and the country remains unable to export crude through the Strait of Hormuz.

Officials stated that output from major oil fields in southern Iraq—the heart of the nation’s production and export infrastructure—has fallen further to approximately 800,000 barrels per day (bpd), representing a roughly 80% collapse from pre-war levels.

Industry sources previously indicated that earlier this month, the inability to navigate the Strait of Hormuz had already forced southern production down by 70% to approximately 1.3 million bpd. Prior to the outbreak of the U.S.-Iran war, these fields produced roughly 4.3 million bpd. Iraq holds the position of OPEC’s second-largest producer, trailing only Saudi Arabia.

Informed officials noted that Iraq decided to implement deeper production cuts starting Tuesday, instructing BP to reduce daily output at the supergiant Rumaila field by 100,000 barrels (cutting from approximately 450,000 bpd to 350,000 bpd).

In an official communiqué to BP, the state-run Basrah Oil Company wrote: "Due to storage tank inventories reaching high critical levels, please reduce production and pumping at the North Rumaila field from current levels to 350,000 bpd, effective 09:00 local time on March 24."

Iraq also requested that Italy’s Eni slash production at the Zubair field by 70,000 bpd from its current level of 330,000 bpd. Sources added that output at several state-owned fields has also been curtailed.

Further Cuts Likely in Coming Days

Iraqi energy officials warned that if the crisis in the Strait of Hormuz remains unresolved, additional production cuts may be announced in the coming days.

While reports surfaced last week regarding an agreement between the Iraqi central government and Kurdish authorities to restart the Kirkuk-Ceyhan pipeline—restoring exports via the Turkish port of Ceyhan—the move has had a negligible impact on global supply.

The pipeline has remained largely dormant for years due to long-standing disputes over revenue sharing between Baghdad and the semi-autonomous Kurdistan Regional Government (KRG).