Iran has been forced to store its excess oil in junk storage sites, using improvised containers and trying to ship it by rail to China as the standoff over the Strait of Hormuz continues, The Wall Street Journal reported.
The country is hoping to avoid a production shutdown that would decimate its economy as it faces an infrastructure crisis as the war continues to drag on.
Iran was still able to export its oil even though it shut down the Strait of Hormuz. The U.S. has imposed a blockade on traffic out of Iranian ports since mid-April to pressure the country into accepting a ceasefire.
Prior to the blockade, Iranian crude oil and condensate loadings averaged 2.1 million barrels a day, commodity analytics firm Kpler said. But since the blockade began, only five cargoes have been observed, with crude oil shipments averaging 567,000 barrels a day.
Before the war began in February, Iran exported 2 million barrels a day.
If the blockade continues into mid-May, Iran could cut its current production by more than half, according to Kpler.
The country's onshore oil inventories have increased by 4.6 million barrels to 49 million barrels since the blockade began.
Iran now has about 90 million barrels not being used, the Journal reported, citing Kpler. The country might not be able to store all of its excess oil and has been forced to use disused tanks that were previously discarded because of their poor condition, an Iranian oil official told the Journal.
While Iran has been shipping its oil to China via rail, the journey can take weeks and is not considered as cost-effective as shipping by sea to reach the teapot refineries in the northeastern part of the country, the Journal said.
"Would the teapots, which operate on thin margins and are attracted to the discounts they have been able to obtain on sanctioned Iranian barrels, be willing to pay if rail shipments are higher due to transit costs?" Erica Downs, a Chinese energy-policy specialist at Columbia University, told the Journal.
"Desperate times call for desperate measures," Downs added.
If Iran shuts down oil production completely, it could damage older oil fields, consulting firm Rystad Energy told the Journal.
Sam Barron ✉
Sam Barron has almost two decades of experience covering a wide range of topics including politics, crime and business.
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