Goldman Sachs: After the reopening of the Strait of Hormuz, Gulf oil production is expected to significantly recover within a few months.

Goldman Sachs released a report on Thursday stating that following the full reopening of the Strait of Hormuz, the Gulf region's oil production, which has sharply declined due to the conflict with Iran, is expected to recover substantially within a few months, but full recovery may take longer. Goldman Sachs estimates that in April, approximately 14.5 million barrels per day of Gulf region crude oil were offline, accounting for about 57% of pre-conflict supply. This is mainly due to precautionary shutdowns and inventory management, rather than physical damage to the oil fields themselves. Under normal conditions, the Strait of Hormuz handles about one-fifth of global oil transportation, so a prolonged disruption will have a significant impact on the global energy market. Goldman Sachs pointed out in the research report that assuming the oil infrastructure is not attacked again, if the strait is safely and continuously reopened, with the help of Saudi Arabia and the UAE's spare production capacity, oil production is expected to return relatively quickly. However, Goldman Sachs stated that any production recovery will be constrained by logistics and well performance. Currently, the available capacity of empty oil tankers in the Gulf region has decreased by approximately 130 million barrels, a 50% decline, which will constrain the speed at which producers can transport oil after export recovery. In addition, long-term well shutdowns may also decrease flow rates, especially in low-pressure reservoirs, requiring well workovers to fully restore production. Goldman Sachs stated that the longer the production is constrained, the slower the recovery rate may be. There are differences in recovery prospects among countries: Goldman Sachs believes that Iran and Iraq face greater risks due to factors such as reservoir characteristics, infrastructure challenges, and sanctions, while Saudi Arabia is likely to increase production more quickly. Goldman Sachs cited average forecasts from external agencies indicating that oil-producing countries in the Gulf may recover about 70% of lost production within three months and about 88% within six months. However, Goldman Sachs also warned that if the strait remains closed for a long time, there is an increased risk of sustained supply damage.