Energy market intelligence company S&P Global Energy says the 17-million-barrel-a-day reduction in crude oil and refined product supply available to the market from March 1 to 11 represents the largest oil supply disruption in history, with no other historical episode coming close.

Plans for the largest oil reserves distribution in history, announced on March 11 by the International Energy Agency, may prove to be a bridge from a very unbalanced oil market to one that is less so, but it will be a limited solution if the Strait of Hormuz remains closed, S&P Global Energy adds.

The plan to release 400-million barrels will help the market adjust to the current imbalance; however, it remains to be seen how the release will support the markets that need it most, particularly Asian markets, the analysis says.

It will take months for the 400-million barrels to match the 430-million barrel reduction in global supply in the month of March alone.

“There is too much oil that cannot be exported via the Strait of Hormuz and not enough in Asia where stocks are running down. The market is seriously unbalanced, which will continue until the Strait is reopened and upstream and downstream operations return to normal.

“It will not happen quickly,” says S&P Global Energy crude oil research VP and global head Jim Burkhard.

S&P Global Energy estimates that about three-million to four-million barrels a day of oil were exported in the first 11 days of March via routes that bypass the Strait of Hormuz.

By contrast, 21-million barrels a day of oil exports transited the Strait before the war.

More oil will come from routes that bypass the Strait. Saudi Arabia’s export facility at Yanbu on the Red Sea has an export capacity of five-million barrels a day. The United Arab Emirates’ Fujairah terminal, which lies outside of the Strait of Hormuz, can export as much as 1.8-million barrels a day.

However, exports from southern Iraq, Kuwait, Bahrain and Qatar will remain negligible until the Strait of Hormuz reopens, S&P Global Energy says.

Additionally, although transportation was initially the source of the disruption, concerns continue to grow about underlying oil production.

As much as six-million to seven-million barrels a day of Gulf crude oil production capacity may be shut in, though the overall number remains in flux.

Iraq has shut-in at least two-million barrels a day of production owing to storage constraints, Kuwait has shut-in some production and other countries are also shutting-in production owing to security or storage concerns, or both.

“Re-starting field production of this scale will be a massive technical exercise. Depending on the reservoir and how long it is shut-in, it could take weeks, months or more to fully restore output.

“There is a similar concern on the downstream side, as large refineries in the Gulf have stopped or curtailed operations,” Burkhard says.

Meanwhile, S&P Global Energy has updated its base case outlook with the expectation for dated Brent prices ranging between $70 to $100 on a monthly average basis for the remainder of this year.

This outlook assumes secure tanker flows via the Strait of Hormuz resume in coming weeks.

However, the potential for exceptional volatility remains, owing to the uncertainty of the situation.

If the Strait of Hormuz were to be closed for a couple of months, instead of weeks, crude oil prices would likely hit new record highs, it says.