JPMorgan: If the Strait of Hormuz reopens, the recovery of oil supply will go through three major stages, taking approximately......

If the Strait of Hormuz reopens, the market will experience a rapid but uneven normalization process, with price adjustments in financial markets occurring much faster than physical logistics. The market will price in not only the resumption of navigation but also the full return to normal supply conditions, which in practice will take several months to achieve. Currently, supply disruptions have caused a daily loss of 12.3 million barrels, and this loss is expected to increase by another 1 million barrels per day in April, bringing the total daily loss to 13 million barrels. We assume the oil supply recovery process is divided into three stages.
1. Stage One (Weeks 1-3): Cautious Restart.
It is expected that in the first three weeks, daily production will recover to 6.3 million barrels, about half of the current reduction. Even if a ceasefire agreement is reached between the US and Iran, port operators, tanker owners, pilots, and seafarers will still need to be convinced that entering the Persian Gulf is safe. We assume shipping companies will need about two weeks to confirm that risks have dissipated before resuming navigation. Since a supertanker typically requires 24-48 hours to berth, load, and depart, the restart process itself will be gradual. Tankers may face congestion at loading terminals and while passing through the strait, and high war insurance premiums will still limit shipping activity. Early shipments will mainly consist of delayed cargoes and priority buyers (especially Asian buyers). Overall, we expect port activity to take about two months to fully normalize.
Week 1: Supply increases by 1.7 million barrels per day, with oil-producing countries tentatively resuming navigation to avoid further interruptions in the strait.
Week 2: An additional 2.3 million barrels per day increase, as successful navigation in Week 1 boosts confidence despite ongoing safety risks.
Week 3: Another 2.3 million barrels per day increase, as perceived risks decline and operational planning stabilizes.
2. Stage Two (Weeks 4-8): Systematic Normalization.
By the end of the second month, we expect Gulf region supply to recover to 29.3 million barrels per day, still about 3.4 million barrels below pre-war levels.
1) Saudi Arabia: Near full recovery, benefiting from its scale and alternative export routes.
2) UAE: 95% recovery, similar to Saudi Arabia, but still dependent on full operational and safety restoration.
3) Iraq and Kuwait: Slower recovery due to deeper production halts (affected by storage constraints) and complex logistics restart. We assume these two countries will reach 80% capacity by the end of the second month. Iraq’s southern export system centered around Basra oil terminal and Hoor Al-Amiya has experienced multiple disruptions, with storage limitations forcing significant reductions and sometimes force majeure declarations. Alternative routes like Kirkuk-Jehan can only partially compensate for the loss of southern export capacity. Kuwait faces similar reductions due to storage constraints, and guidance from Kuwait Petroleum indicates that even after hostilities end, full recovery will take several months.
4) Qatar: 60% recovery by the end of the second month, as evidence suggests its liquefied natural gas (LNG) export facilities at Ras Laffan and related infrastructure have suffered substantial damage, requiring years of repair, affecting LNG and associated liquids like condensates and NGLs. QatarEnergy has also quantified losses of associated products (condensates, LPG, naphtha, sulfur, helium).
3. Stage Three (Months 3-4): Bridging the Production Gap.
By the end of the fourth month, we expect Gulf region supply to recover to 99% of pre-war levels, with total output reaching about 31 million barrels per day, about 1.7 million barrels below pre-war levels.
1) Saudi Arabia and UAE: Full capacity recovery.
2) Iraq: Reaching 90% capacity as southern exports gradually restart and with limited support from northern/land routes, but still constrained by restart scale and storage logistics.
3) Kuwait: Reaching 80% capacity, consistent with Kuwait Petroleum’s view that full normalization may take 3-4 months.
4) Qatar: Further recovery to 77%, but still limited by damage to Ras Laffan/GTL facilities; these operations have declared force majeure, and full recovery is estimated to take 3-5 years.
Overall, by the end of the fourth month, most oil-producing countries’ supplies are expected to be about 99% restored, with most production effectively normalized. The main exception remains Qatar (model shows 87%), below normal levels due to longer repair times for damaged gas/LNG/GTL infrastructure, even if tankers can resume sailing, the recovery of NGLs, condensates, LPG, and helium will be delayed.
(The above analysis is from JPMorgan’s April 4 report, for reference only)#Gate广场四月发帖挑战