The conflict in Iran had already taken out over 200 million barrels of oil, and analysts believe that a large part of this will not be coming back.
An analysis of shipping data provided by the Open Source Unit at Al Jazeera revealed that a combined total of exports from countries like Iraq, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates came to a standstill in March.
As reported by the International Energy Agency, oil shipment through the Strait of Hormuz dropped from 20 million barrels per day in February to only 3.8 million in early April.
Speaking about this unprecedented crisis, the executive director of the IEA, Fatih Birol, said that it is the biggest energy security crisis ever witnessed in the world.
The destruction of production infrastructure across the Persian Gulf sets this crisis apart from past oil shocks.
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The IEA says that more than 80 energy facilities have been attacked since the conflict began, and more than a third of them are badly damaged.
Iranian missiles and drones have hit oil fields, refineries, gas plants and pipelines in Saudi Arabia, Kuwait, Iraq and the UAE.
The costs are astronomical. Rystad Energy estimates a minimum repair bill of $34 billion.
The national oil company of Qatar estimated losses at $20 billion as its Ras Laffan LNG complex will take up to five years to restore following the attack.
In Saudi Arabia, drone and missile attacks hit the East West pipeline which was crucial for diverting supplies around the strait of Hormuz completely.
This strike reduced the pipeline’s capacity by 700,000 barrels per day. In addition, Manifa and Khurais oil fields were hit, each losing around 300,000 barrels of oil production capacity daily.
However, perhaps the greatest threat is that of wells closing and never reopening.
With no place to store the oil, the producers shut down the wells all over the Persian Gulf.
Experts warn that restoring production from idle wells is extremely difficult and costly. Some of these wells may not come into operation ever again.
They also thought that another two to three million barrels could come back over the rest of the second quarter.
They warned that operational problems, broken infrastructure, and export delays would make the recovery less smooth.
Reuters asked eight analysts what they thought about the oil market.
They said that this year, on average, it will have a deficit of 750,000 barrels per day. This is a big change from the 1.63 million barrel per day surplus that was expected last September.
The peace talks in Islamabad failed, and the US imposed a naval blockade against all ships sailing to and from Iran’s ports by 13 April.
Global stockpiles of crude oil saw a decline of 85 million barrels within just one month in March, and even the International Energy Agency’s joint release of 400 million barrels of oil is a temporary solution at best that cannot be repeated ad infinitum.
However, the real concern regarding energy lies in its underlying structure.
Regardless of whether diplomacy succeeds in the next few weeks, the destruction of infrastructure, closure of oil wells and release of stockpiles have meant that the overall picture regarding oil production has changed.
Experts suggest that energy prices will remain high until 2027.
