Will oil prices collapse if the Strait of Hormuz reopens?
Core argument: Continuous well operations and rotation shutdowns limit output losses to weeks rather than months, enabling rapid Hormuz reopening to drive.
Nowhere in the region has output fallen to zero, because of the need to meet domestic oil demand and, in the cases of Saudi Arabia and the UAE, the use of pipelines bypassing Hormuz. Thus, petroleum engineers have kept some output running continuously, purposely selecting the wells most likely to have problems when reopening if they’d been out of service. In other cases, they’ve rotated the shutdowns, keeping some wells closed for a couple of weeks, then reopening them while shutting down others in an effort to never have an individual well out of business for more than a few weeks. They have choked down flows to reduce output to a trickle, but still keeping a few barrels coming out. By doing so, they try to avoid problems down the road, like clogging or loss of pressure. Oil engineers are, above all, expert problem solvers. So while the restart process won’t be easy once traversing the strait is possible again, don’t mistake difficult for impossible. The reopening of Hormuz, when politics allows it, will surprise with its speed.