Kuwait cuts oil output as storage fills up

Investing.com -- Kuwait has started reducing production at some oil fields after exhausting its crude storage capacity, according to a report from the Wall Street Journal, citing people familiar with the matter.

The country is discussing limiting its production and refining capacity to levels needed only for domestic consumption, the people said. A decision on these broader cutbacks is expected within days.

Investors have been concerned about oil storage since the conflict with Iran started, and they were quick to react the WSJ headline, with crude prices rising further and U.S. equites selling off.

Shutting in an oil well risks long-term damage to reservoir pressure and incurs high restart costs, typically making it a measure of last resort. Restarting production can take days or even weeks depending on the reservoir.

With shipping through the strait paralyzed by the Iran conflict, the region’s major oil producers are racing against time. Major storage facilities in Saudi Arabia and the United Arab Emirates are also filling up rapidly, with both countries expected to reach their limits in under three weeks.

Once storage fills up, producers face the technically and politically costly reality of halting production.

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