Persian Gulf Oil Output May Not Recover Until Early 2027

Restoring Persian Gulf oil production to pre-conflict levels may not happen until 2027.

While details have yet to be officially released, the memorandum of understanding between the United States and Iran is nearing completion, signaling a possible end to the three-month-old conflict and a potential return of stability to global energy markets.

Crude prices have plummeted since a deal was announced, with a barrel of U.S. oil falling below $80 on the New York Mercantile Exchange.

Whether oil prices ease toward a pre-war range may depend on Persian Gulf producers and on the extent of damage to their energy infrastructure during the conflict.

“Restarting infrastructure and logistics flows could take time, while some shipping operators may remain cautious about returning to the Strait in the near term,” ING commodity strategists said in a June 15 research note.

The International Energy Agency (IEA) projected that more than 14 million barrels per day of output—about 14 percent of global demand—has been temporarily eliminated.

Production volumes could return to normal by early next year, says Baron Lamarré, co-founder of the International Digital Exchange and former oil and gas trader.

“Output can reach about 70 percent in three months, 90 percent in six months, and full pre‑war levels generally in six to nine months—longer if key infrastructure suffered significant damage,” Lamarré told The Epoch Times.

Situation in Persian Gulf

Countries in the Persian Gulf—Bahrain, Iraq, Kuwait, Oman, Saudi Arabia, and the United Arab Emirates—reported dozens of gas plants, oil fields, and refineries being damaged by drone and missile attacks.

These incidents knocked out hundreds of thousands of barrels of crude output.

Saudi Arabia, for instance, saw its production fall by about three million barrels per day between March and May relative to late 2025 levels, according to data from the Organization of the Petroleum Exporting Countries (OPEC).

Before the conflict, Kuwait was producing about 2.5 million barrels per day. As of May, the nation’s total daily output is around 573,000.

Still, Phil Flynn, energy strategist at The Price Futures Group, says there is hope that some of the regional infrastructure might not be as badly damaged as previously estimated.

“While there were strikes on facilities like Ras Laffan, Yanbu, Fujairah, South Pars, various Gulf refineries, and depots, many reports indicate repairs are feasible in months rather than years for key sites,” Flynn said in a June 16 note.

“Keep in mind that not all production was wiped out; some facilities restarted after temporary shutdowns, and much disruption stemmed from logistics/shipping fears rather than irreparable physical destruction.”

The IEA also signaled optimism in its latest Oil Market Report, released on June 17.

Exports from the region are expected to gradually recover once production is returned online and the Strait of Hormuz reopens, the IEA noted.

Additionally, Gulf supply losses will be partially offset by accelerated output in North America and Latin America.

The drop in crude imports by China and Japan has also cushioned the blows from the energy shock.

Looking ahead to 2027, global energy markets could return to balance.

Global crude demand is forecast to rise by a tepid 2 million barrels per day to above 105 million barrels per day.

Inventories, meanwhile, are projected to surge by about 8 million barrels per day to 110 million.

“This may provide a welcome respite to the market and an opportunity to replenish depleted inventories, or to build new strategic reserves, as countries review their energy strategies and policies in response to the crisis,” the IEA said.

U.S. crude production has surged by almost 100,000 barrels to around 13.8 million barrels per day, according to the Energy Information Administration.

Venezuela has also witnessed a sizable increase in output, rising to nearly 1.1 million barrels per day from 937,000 in the prior year.

IEA members agreed to release 400 million barrels of oil from strategic reserves in March.

In the United States, the Strategic Petroleum Reserve is at its lowest level since 1983 for the second time in four years.

As of June 5, domestic emergency stocks sit at around 349 million barrels.

Eyes on OPEC

Leadership at the broader OPEC+ alliance could also play a role in Persian Gulf production, says Arif Gasilov, a partner at the natural resources firm Gasilov Group.

“OPEC+ decisions will also determine how fast, because Saudi and UAE have spare capacity but may hold back if prices are already falling from the deal,” Gasilov told The Epoch Times.

The group has faced internal strife and external criticisms over its quotas and response times to changing global energy market dynamics.

This was one of the reasons Abu Dhabi withdrew its membership from the global cartel after 59 years in April.

The country had invested significantly in domestic production capacity—estimates suggest more than 5 million barrels per day—but OPEC’s production quotas had limited output.

The UAE recently confirmed plans to raise output above 5 million barrels after leaving the six-decade-old organization.

OPEC countries collectively produce about a third of the world’s oil, and crude exports represent half of all oil shipped across the globe.

Reuters contributed to this report.