Iran's Oil Storage Nears Capacity – Will the Country Be Forced to Cut Production?

The US naval blockade of Iranian ports and the Strait of Hormuz, imposed on April 13, has raised concerns that Iran may exhaust its crude oil storage capacity and be forced to limit production.

Bloomberg reported on Tuesday that analysis from data and analytics firm Kpler shows Iran could run out of crude oil storage within 12 to 22 days if the blockade continues.

Last week, US Treasury Secretary Scott Bessent stated that storage capacity at Kharg Island, which handles most of Iran's oil exports, would be full "within days."

So how quickly could Iran run out of storage space, and why does this matter?

What is happening at the Strait of Hormuz?

The Strait of Hormuz is a narrow waterway connecting the Persian Gulf to the open ocean. It lies within the territorial waters of Iran to the north and Oman to the south. It is not international waters.

In peacetime, 20% of the world's oil and liquefied natural gas (LNG) supply transits this corridor.

Two days after the US and Israel launched their first airstrikes in the war against Iran on February 28, Ebrahim Jabari, a senior advisor to the commander-in-chief of Iran's Islamic Revolutionary Guard Corps (IRGC), announced the strait was "closed." He said that if any vessel attempted to pass, the IRGC and navy would "burn those ships."

As the war dragged on and negotiations failed to reach a deal, Iran at times over the past two months allowed some "friendly" vessels and those that paid a fee to pass. It now refuses to allow any foreign-flagged vessels, even those previously considered friendly, to cross until the US lifts its own naval blockade.

Iran's First Vice President Mohammad Reza Aref said on April 19 that "the security of the Strait of Hormuz is not free."

"One cannot restrict Iran's oil exports while expecting free security for others," he wrote on X. "The choice is clear: either a free oil market for all, or the risk of significant costs for everyone. Global fuel price stability depends on ending the guarantees and long-standing economic and military pressure against Iran and its allies."

Since the US naval blockade began, the US has fired on and seized an Iranian-flagged oil tanker near the Strait of Hormuz and diverted vessels on the high seas carrying cargo to or from Iran. Iranian armed forces have condemned these actions as "illegal" and "piracy."

The naval blockade means Iran may have to store the oil it produces.

Iran is the third-largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC) after Saudi Arabia and Iraq, and exports 90% of its crude oil via Kharg Island in the Persian Gulf for transit through the Strait of Hormuz.

What has the US said?

The US wants to limit Iran's oil revenue, which has increased since Tehran closed the Strait of Hormuz to other vessels. This is a key motive for Washington's naval blockade.

Iran exported 1.84 million barrels per day (bpd) of crude oil in March and shipped 1.71 million bpd in April, compared to an average of 1.68 million bpd in 2025, according to Kpler.

However, the blockade that began in mid-April means most exports must be stored instead.

Bessent wrote on X on April 22: "Within days, the storage on Kharg Island will be full and Iran's fragile oil wells will be shut down. Iran's maritime trade restrictions directly target the regime's main sources of revenue."

How much oil can Iran store?

Iran's domestic refineries have a production capacity of 2.6 million bpd, according to energy consultancy Facts Global Energy.

Satellite data shows that Iran's oil inventories have risen sharply since the blockade began, and in the days after the US tightened measures, stocks increased so rapidly that Iran appears unlikely to export any more oil.

From April 13 to 21, data shows inventories rose by more than 6 million barrels, according to the Columbia Center on Global Energy Policy (CGEP). From April 17 to 21, inventories increased very quickly, with a daily rise of 1.7 million bpd.

As of April 20, tanks at Kharg were about 74% full, after the island alone received an additional 3 million barrels of oil, CGEP reported.

Typically, oil companies avoid filling storage beyond 80% capacity for safety, emissions control, and flexibility. However, Iran and other oil producers have exceeded this limit before, for example during the COVID-19 pandemic. In April 2020, inventories on Kharg Island reached nearly 90% capacity, an all-time high.

Iran also has some capacity to store crude oil as "floating storage" or on stationary vessels. About 127 million barrels can be stored this way, Frederic Schneider, a non-resident senior fellow at the Middle East Council on Global Affairs, told Al Jazeera in an interview on April 14.

Will Iran need to cut oil production?

Muyu Xu, a senior crude oil analyst at Kpler, told Al Jazeera that the blockade could eventually force Iran to cut production.

"However, given that onshore storage capacity remains (equivalent to about 20 days of Iran's current production), we expect any production cuts to be gradual over the next week, with a higher likelihood of acceleration in May," she said.

Analysis by Antoine Halff, a non-resident fellow at CGEP, is similar. Halff wrote in a paper published by CGEP on Tuesday that it might take some time before the blockade forces Iran to halt production "in a major way."

However, Halff added, Iran could still choose to halt production "quite aggressively," but this "would be more a matter of choice than necessity."

He explained: "Doing so would have the advantage of providing Iran relatively ample backup storage after shutdown and allowing an easier restart when conditions permit, thus minimizing the adverse impact of the blockade on long-term supply."

Why does this matter?

Halting oil production risks damaging underground reservoirs by reducing reservoir pressure, allowing water or gas to infiltrate producing zones and altering oil flow. Experts say this could make some oil more difficult or expensive to extract later.

Restarting oil production can also be slow and costly, involving repairs to corroded equipment or clearing blocked pipelines.

Stopping production would also reduce Iran's export revenues. However, analysts say that for several months, Iran can continue earning revenue from oil already in transit at sea.

Kenneth Katzman, a former Iran analyst at the Congressional Research Service in Washington, DC, said Iran is not exporting new oil during the US blockade, but Tehran currently has 160 to 170 million barrels of oil on vessels around the world.