Iran's oil sector fails to "explode" as Trump's shut-in deadline passes

US president Donald Trump imposed a naval blockage on the Strait of Hormuz to block the exit of Iranian oil and said that the storage would “explode” on April 29 after Iran’s storage tanks were filled to brim. That day came and went and nothing happened. Digging a little deeper and Iran has a lot more wiggle room than the White House gives it credit for and its oil sector may yet survive the blockade unscathed.

The US blockade of tankers serving Iran’s oil exports is intended to cut Iranian oil exports to near-zero and force its production to stop as storage tanks fill, putting unendurable pressure on Tehran and forcing it to return to the negotiating table. That is the plan.

Trump is demanding major concessions and so far, Tehran has dug its heels in and refused to budge from a maximalist position. Trump is demanding the reopening of the Strait of Hormuz to free passage, a reduction in Iran’s military power, and the end of its nuclear enrichment programme. The Islamic Republic wants a legally binding security deal, reparations and full and permanent control of the straits.

Iran has 12-22 days of storage still available according to Kpler by making use of old tankers floating around the Persian Gulf and it has the option of slowing down production rates to spin that out even further, according to Bloomberg commodities correspondent Javier Blas.

Oil focus

Iran has been the only country that has been exporting its oil from the Gulf since the IRGC closed it on March 2. The US naval blockade imposed two weeks ago has effectively slowed the flow of oil out and deprived the regime of an estimated $175mn a day from oil exports.

More importantly the White House believed Tehran will blink as shutting down production would do “irreversible damage” to the fields and hobble the Iran economy going forward. Capacity would be reduced to “about 50% of what it is right now,” Blas told Fox News. Experts disagree.

“The reality, however, is that Iran has shut in oil production in the past without serious repercussions (as have other oil producers), although gas production may have to be cut back because of the lack of outlets for associated hydrocarbon liquids. That would require rationing of gas between the power, industrial, and residential sectors, as well as exports,” Robin Mills of the Centre of Global Energy Policy said in a blog.

The Iranian onshore is also known to have one of the world’s lowest cost oil wells, despite low recovery factors.

Iran’s crude oil production hovered around 3.2-3.3mn barrels per day (bpd) during 2025, though that appears to have dropped somewhat to 3.06mn bpd in March 2026. In addition, Iran derives about 1.3mn bpd of condensate (effectively very light oil) and natural gas liquids (NGLs) from natural gas production.

Iran’s refining throughput averaged around 2.1mn bpd pre-war out of a total 2.4mn bpd capacity, and domestic oil consumption averaged roughly 2mn bpd.

“Tehran might be able to export small quantities by tankers that evade the US blockade, as well as by trucks and rail. The required production cut to avoid filling storage entirely is therefore up to 50% of pre-war levels, the remaining production being refined and used domestically,” Mills said.

Production was at a 46-year high before the war started as the US had quietly turned a blind eye to rising exports in order to balance a market where Russian exports were being reduced by sanctions and Washington sought reduce Iranian supply to the market to force Tehran’s hand.

However, the blockade is still not having the desired effect. Iran is still loading oil from its Kharg Island terminal onto ships that were already loitering in the Persian Gulf, also trapped. Many of these tankers are well past their useful life spans, but as oil storage tanks they serve a purpose. That has bought an extra two or three weeks.

And slowing production will buy even more time. That process has already begun, according to Blas. By mid-May the production will need to have halved from pre-war levels as storage reaches its maximum capacity, with only domestic consumption and some alternative exports by truck, rail and ships in the Caspian Sea providing a pressure release valve. But at these lower levels in theory Iran can keep its oilfields ticking over indefinitely.

The end of exports would hit the economy hard, but it is a country at war with a superpower and in an existential fight for its existence. So far Tehran has shown little sign of fatigue and it still has several extremely destructive military options available that it will not be afraid to use.

“The state-owned National Iranian Oil Co. has plenty of experience throttling production up and down. During the first Trump administration in 2019 Iran had cut production significantly thanks to sanctions then. A stoppage now lasting weeks, or even a couple of months, would not be enough to condemn the wells,” said Blas.

There are several other well-used techniques to manage production, including rotating shutdowns between fields that keeps each field running for as long as possible to minimise the damage from long-lasting closures. And unlike Russia with extreme climatic conditions or Venezuela with extremely heavy oil, the worst problems the Iranian fields face from a prolonged shut in is water inundation that can be relatively easily reversed.

“Wells with a high water-cut may not flow naturally after being shut-in. They can be restarted by pumping or by temporarily injecting nitrogen to lighten the fluid column. Fluid blocking and cross-flow between reservoir zones with different pressures or water contents can create problems. Long-term shut-ins could lead to corrosion of wells and pipelines, the settling of sand and debris in the wellbore or pumps, or the mechanical deformation of the wells,” said Mills. “Careful technical planning of shutdowns and restarts and the use of chemical corrosion inhibitors can fix most of these problems.”

From the last stoppage five years ago, the NIOC recovered and brought production to a 46-year high, showing the fields can bounce back fairly easily if the process is well managed. Iranian production also rebounded quickly from low levels following the Joint Comprehensive Plan of Action (JCPOA) in 2016, and post-Covid in 2023. Experts estimate that after the blockage, production will return to 70% of previous levels within a few months.

Gas harder to restart

While oil production can probably quickly from a shut-in, gas production faces more problems. The main gas fields are in the Fars and Bushehr provinces and adjoining offshore fields.

The most notable is South Pars, the Iranian sector of the North Field in Qatar, the world’s largest non-associated gas field. These fields yield large quantities of condensate and NGLs and have been a major source of growth in Iran’s overall output of hydrocarbons.

Output from South Pars has been constrained in recent years by declining reservoir pressure, raising concerns over the long-term sustainability of production, and leading to significant Iranian investment in the installation of offshore compression facilities, similar to those deployed by Qatar in the shared field.

However, Iran has faced persistent challenges in constructing or procuring the necessary equipment owing to international sanctions, even prior to the current conflict.

Damage to onshore processing infrastructure has compounded these issues. Facilities linked to South Pars were hit in an Israeli attack on March, reducing condensate production by an estimated 100,000-120,000 barrels per day. The disruption has limited Iran’s ability to handle associated liquids, including condensate and NGLs.

If Iran is unable to export, consume or store the excess volumes of liquids, it may be forced to scale back gas production. Such a move would require authorities to prioritise domestic and export allocations across competing sectors.

Gas exports to Turkey and Iraq, domestic power generation, industrial consumption, reinjection into oil fields, and residential supply for heating and cooking would all be affected by any rationing measures. The balancing of these demands is likely to become more complex as infrastructure constraints persist.

At the same time, reduced industrial activity may ease some pressure on gas demand. War-related damage to petrochemical plants and ongoing export restrictions are expected to limit consumption from the industrial sector.

Seasonal factors may also provide temporary relief. Peak residential demand for gas typically occurs during winter months, which remain approximately six months away. In the interim, some substitution in the power sector is possible, with oil-based fuels replacing gas in electricity generation where feasible.

The combined impact of infrastructure damage, sanctions, and operational constraints continues to weigh on Iran’s ability to sustain output from its largest gas field.