Gulf Oil Output Can Recover Quickly After Hormuz Reopening: Goldman

The research wing of the investment bank estimated that Gulf output went down by 14.5 million barrels per day (mbd), or 57%, from pre-war levels. In its latest research note, Goldman Sachs said a swift recovery is possible, given there are no renewed strikes on oil assets and a full, safe reopening of the Strait in the coming months. However, the last leg of the ramp-up could be prolonged and may not fully materialize if the waterway remains closed for an extended period.

The speed of recovery will hinge on transportation and well flow rates. Once the Strait reopens, the key constraints are likely to be pipeline capacity, the availability of empty tankers to clear previously produced oil, and the mobilization of materials and workers for field workovers. Goldman estimates that available empty tanker capacity in the Gulf has fallen by about *50%, or 130 million barrels*, since the start of the conflict.

Historical data shows Hormuz flows peaked at 23.3 mbd compared to a normal 20 mbd, with pipeline redirection capacity running at 3.5 mbd above normal. Forced curtailments can also create reservoir complexities, requiring intervention and workover jobs before wells can be brought back to prior production rates. The longer the closure, the more extensive the work needed and the slower the procurement of depleted inputs like drill pipes, which could further delay the restart.

Goldman sees three reasons for a relatively solid recovery in the near term. Firstly, publicly reported evidence of physical damage to oil fields remains limited compared to LNG assets. Secondly, the comments from Saudi Aramco's President and CEO in March suggested that Saudi production could ramp up relatively quickly. Third, history shows that Saudi Arabia and the UAE are likely to deploy available spare capacity to stabilize markets.

Still, the report cautions that a full recovery may take several quarters and risks being only partial after a prolonged closure. Reservoir characteristics vary widely across Gulf fields, with Iran and Iraq estimated to have a higher share of production from fields with relatively low reservoir pressure, making restarts more complex. Infrastructure sophistication, maintenance levels and sanctions risks also differ across countries.

Historical episodes of supply disruptions show mixed outcomes in terms of speed and extent of recovery, and Goldman Sachs noted that today's shock is unprecedented. An average of external forecasts from the EIA and IEA shows recoveries of 70% of lost production after three months* of reopening and 88% after six months.

While not its baseline, Goldman Sachs warned that the risk of "scarring" to oil production capacity could rise if hostilities resume, as seen in several of the previous five largest oil supply shocks.

- ANI