Middle East Oil Supply Plunges, Crisis Deepens

This includes a critical 7 million barrels per day (bpd) of crude supply, representing roughly 7% of global liquids demand. Iraq has been particularly hard hit, with over 60% of its pre-conflict volume curtailed.

Rystad Energy warns of a worst-case scenario where regional crude output could plummet to 6 million bpd, a 70% reduction from baseline, with restoration taking months even after resolution. Currently, 14 million bpd remains from a pre-conflict 21 million bpd, but this supply is highly precarious. Approximately 1.5 million bpd from Kuwaiti and Iraqi fields are at risk of further curtailment as domestic storage fills without export routes.

Another 6.5 million bpd relies on bypass infrastructure like the UAE's ADCOP and Saudi Arabia's East-West pipelines, which have already been targeted. The loss of Saudi Arab Heavy and Arab Medium grades, accounting for 2.2 million bpd, is particularly impactful for Asian refineries configured for these sour crudes.

Refiners are now forced to seek more expensive, long-haul alternatives, adding freight costs and uncertainty. While Russia might offer a modest 200,000-300,000 bpd of Urals, it's insufficient to offset the potential loss of Iranian crude or the critical Arab Heavy/Medium grades, signaling a historic supply crisis if the conflict persists.