Major Oil Producers See Output Fall

The United States lifted its blockade of the Strait of Hormuz late Thursday as a 60-day window to turn an interim peace agreement with Iran into a full-fledged one opened. A first round of talks in Switzerland was swiftly canceled, however, as fighting broke out between Israeli forces and Hezbollah. The longterm navigability of the world's most important oil chokepoint therefore remains in limbo. Traffic in the strait was reportedly already slowed down by the uncertainty brought about by the cancelation.

Three Saudi supertankers carrying 6 million barrels of oil passed the strait Thursday. U.S. Vice President JD Vance, who attacked Israel harshly over the events that disrupted his trip to Europe to attend the talks, said that 12 million tons of crude had already passed the Strait of Hormuz between Thursday night and Friday morning.

Due to the prolonged closure, OPEC nations which primarily use the waterway to export their oil saw production fall severely between March and May, data by the organization shows. While Saudi Arabia and Iran each produced 700 million fewer barrel per day in May than in March, this number was almost 600 for Kuwait. The nation suffered the biggest decline in relative production as a result of having few alternatives to transporting oil through the waterway. Overall, OPEC said it still produced almost 19 million barrels per day in May. Reuters calculations arrived at a total closer to 16 million, which would be the lowest level of production for OPEC since the year 2000.

Due to the oil transportation and production woes brought about by the Hormuz closure, several nations – including the United States, Japan and Germany – tapped into their strategic reserves to mitigate price pressures. U.S. reserve levels fell to the lowest levels in decades, also aided by the fact that oil wasn't sufficiently replenished after 2022 releases following the Russian invasion of Ukraine under U.S. President Joe Biden.