The four major oil-producing countries in the Gulf join hands to cut production! The Strait of Hormuz does not reopen, and the oil price surge plot is not over.

With the continued substantial military blockade of the key global energy transport route, the Strait of Hormuz, the trend of reduced oil production in the Middle East is deepening, causing the chaos in the energy market to expand. According to media reports citing informed sources, the four major oil superpowers in the Middle East - Saudi Arabia, Iraq, United Arab Emirates, and Kuwait - which heavily rely on the shipping route through the Strait of Hormuz, have collectively reduced their production by approximately 6.7 million barrels per day. Undeniably, the Strait of Hormuz remains a critical chokepoint for over 20% of global oil transport, and while oil prices surged on Monday before falling back and experiencing a rapid loss, overall they still remain in a high volatility, high-risk premium range. This production cut is the most substantial global oil supply response since the outbreak of the current war between the United States/Israel and Iran, meaning that these four countries have effectively reduced their combined oil production by around one-third. At the same time, this has led to a roughly 6% reduction in global supply. The latest round of geopolitical conflict in the region has now entered its second week, involving over a dozen Middle Eastern countries. As major energy export channels are effectively closed, leading to the gradual filling of oil storage tanks in many countries in the region, major energy-producing countries are forced to significantly reduce production. These production cuts on Monday drove the international benchmark crude oil price, Brent crude futures, close to $120 per barrel, but following a hint from U.S. President Donald Trump that the war could end soon, oil prices saw a significant drop, experiencing a rare "major reversal" within just 24 hours. "I think this Middle East war is pretty much over. I think it's about time it ended," Trump's statement and the highly uncertain expectation he put forth caused the previously soaring oil prices to abruptly drop from approaching $120 to around $85 a barrel. Behind this 24-hour rollercoaster of oil prices is the deep-seated anxiety of the Trump administration towards high oil prices impacting inflation and election prospects, as well as the complex energy market game involving the disruption in the Strait of Hormuz, reduced production in the Middle East, and the disruption to the global supply chain. As the four major oil-producing countries in the Middle East join forces to reduce production, the energy market is in chaos. According to the sources mentioned above, Saudi Arabia has significantly cut its daily oil production by 2 to 2.5 million barrels, the UAE has reduced by 500,000 to 800,000 barrels, Kuwait has cut by around 500,000 barrels, and Iraq has reduced by approximately 2.9 million barrels. Amin Nasser, the CEO of Saudi Aramco, stated during an earnings conference call, "While we have faced some disruptions in the past, this time it is undoubtedly the biggest crisis the oil and gas industry in the region has faced so far." Nasser added, "This interruption has not only caused serious chain reactions in shipping and insurance industries but has also had a huge domino effect on aviation, agriculture, automotive, and other industries. The longer the interruption lasts, the more catastrophic the impact on the world oil market and the more severe the impact on the global economy." In proportion, Iraq has seen the deepest reduction in oil production. According to compiled data, the actual scale of reduction in Saudi Arabia, the UAE, and Kuwait is equivalent to about 20% to 25% of their February production levels. "In the current geopolitical crisis, global inventories are at their lowest level in five years, and the rate of inventory decline will accelerate. The majority of remaining global oil capacity is concentrated in this region, so the restoration of shipping in the Strait of Hormuz is critically important," Nasser said. The latest statistics show that the world's largest oil exporter, Saudi Arabia, produces approximately 10 million barrels of oil per day and exports about 7 million barrels daily, far exceeding major oil-producing countries such as Russia and the United States. Despite being the largest oil producer globally, the U.S. net exports remain lower than Saudi Arabia's due to massive domestic consumption. Russia is the second-largest exporter, but its exports are constrained by geopolitical issues and sanctions. Saudi Aramco, controlled by the Saudi government, has diverted some of its oil and gas shipments from the usual route through the Strait of Hormuz to the Yanbu oil and gas export area on the Red Sea. However, the pipelines carrying these export volumes do not have enough capacity to fully replace this massive energy export system dependent on the Strait of Hormuz. The Strait of Hormuz handles around 20% to 30% of global core energy transport, including crude oil and natural gas. Antoine Halff, co-founder and chief analyst of the geographical analysis company Kayrros, pointed out that theoretically, the Arabian producers around the Persian Gulf - including Saudi Arabia, the UAE, Kuwait, and Iraq - have slightly over 100 million barrels of stored energy, roughly one-third of their total production capacity. However, in reality, the effective level is likely even lower, as storage tank operations rarely exceed 80% of actual levels. A recent report by J.P. Morgan, a Wall Street financial giant, indicates that the supply disruption in Gulf oil-producing countries has exceeded expectations, escalating rapidly within just seven days following the outbreak of the Middle East geopolitical conflict. "The actual production cut is currently around 2 million barrels per day, but driven by double pressures of tank saturation and severe shortage of tankers, the regional production cut size will exceed 4 million barrels per day by Friday (March 13)," stated the commodity analyst team at J.P. Morgan. The report pointed out that this figure implies a loss in global oil supply equivalent to over twice Iraq's national export volume in just two weeks. Will oil prices continue to rise in high volatility? This current surge in oil prices is likely not completely over yet, but it seems more like a "high-volatility risk premium market" going forward, rather than a linear one-way uptrend. Brent crude oil briefly surged to $119.5 a barrel on Monday, only to plummet back to around $85 on Tuesday following Trump's statement that the war may "end soon," displaying an extreme reversal within 24 hours. This trend itself indicates that the core of the market currently being traded is not the traditional supply-demand balance but rather the duration of the war, the potential reopening of the Strait of Hormuz, and whether policy measures will be taken to use strategic reserves or ease alternative supplies. In terms of trading structure, this type of market trend usually does not easily end but is continuously affected by fluctuations in geopolitical news. According to a recent report by Deutsche Bank, for international oil prices, other factors besides the reopening of the strait are "not important" - meaning that the timing of when the Strait of Hormuz can safely reopen is the only decisive variable for the current oil price trend. The Deutsche Bank analyst team stated that without the clarification on the reopening of the Strait of Hormuz, policy tools such as the release of G-7 strategic petroleum reserves, exemptions for Russian oil by Western countries, or price ceilings would not fundamentally reverse the oil price trend. The Deutsche Bank research report noted that the international oil price has broken through $100 per barrel, exceeding the pricing range of $80 to $100 per barrel under the "vague closure" scenario, indicating that the market's expectation of the duration of the interruption has extended from one month to a longer period. The range of $105 to $115 per barrel corresponds to a two-month interruption, while $130 to $150 per barrel corresponds to a three-month closure scenario. In the scenario of an expected downtrend, if military escort for commercial fleets can be launched around March 18th, allowing commercial traffic to first resume at 50% capacity and then reach 100% by early April, the actual duration of the interruption will be close to one month. Under this assumption, Deutsche Bank indicates that Brent crude oil prices are likely to fall to around $90 per barrel, depending on the market's judgment of the continuing risk of attacks on oil tankers. What truly supports the continuation of the "unfinished upward trend" is not emotion but the deterioration of the physical supply chain. Latest reports show that as ships continue to avoid the Strait of Hormuz, the production cuts in the Middle East are deepening: Saudi Arabia, the UAE, Kuwait, and Iraq have all been forced to reduce production, not as a proactive measure to maintain prices, but due to the near halt of the primary export channels, resulting in filling oil storage tanks gradually and causing oil-producing countries to have to reduce production. Iran has explicitly stated that as long as the attacks continue, it will continue to implement a regional oil blockade. This means that although the market may experience a significant pullback due to the statement that the "war may end," the risk premium of supply still remains untouched by policy or logistical recovery. Furthermore, the management of Saudi Aramco has openly warned that if shipping through the Strait of Hormuz cannot be resumed, the consequences for the global oil market could be "catastrophic," with the strait itself accounting for over one-fifth of global oil supply transportation. For commodity traders, this means that the rise in oil prices is transitioning from "expectations of risk" to "real supply constraints." Therefore, the central international oil price is likely to remain upward in the short term, but the path is undoubtedly marked by extreme volatility. If the conflict eases rapidly, the Strait of Hormuz partially reopens, and strategic reserves are released or alternative supplies increase, oil prices will quickly shed the risk premium; however, as long as the strait remains blocked, production cuts continue to expand, and Asian and European buyers begin aggressively competing for spot cargoes, oil prices still have the conditions to test upwards again.