Iran is maneuvering between cutting oil production and mounting storage pressures as the U.S. naval blockade in the Strait of Hormuz intensifies. Exports have declined in recent weeks and storage facilities have quickly filled up, prompting the country to already reduce production, according to a senior Iranian official.
But there is a crucial factor that Washington may be underestimating: Tehran has decades of experience preparing for scenarios very similar to the current situation.
The Iran war has reached a stalemate, with each side waiting for the other to back down. President Donald Trump, by targeting Tehran's most important source of revenue, seeks to bring an end to a conflict that has reshaped geopolitics and global energy markets.
Iran has shown some resilience in the face of the blockade so far, relying on tried-and-tested methods to prolong the confrontation and raise the cost to Washington by pushing up oil prices, which reached their highest level in four years this week.
Reduce production before oil storage tanks are full
The official said Tehran is proactively reducing crude production to stay within storage capacity limits rather than waiting for tanks to fill completely, noting that Iranian engineers have learned how to shut down wells without causing permanent damage and restart them quickly, after years of sanctions and shutdowns.
Hamid Hosseini, spokesman for the Iranian Oil, Gas and Petrochemical Exporters Association, explained: We have enough experience and expertise. We are not worried.
These methods were developed during several wars and sanctions regimes, particularly during the first Trump administration when the United States withdrew from the Iran nuclear deal in 2018 and imposed sanctions that forced Tehran to reduce production. In the long run, these restrictions did not eliminate production, as output increased in subsequent years.
New restrictions on the Shadow Fleet
Previously, Iran was able to secretly sell oil to China using its large fleet of tankers and a network of other vessels operating outside international oversight, known as the shadow fleet. However, this is no longer possible as the United States seeks to impose a de facto blockade on the waters surrounding the Strait of Hormuz, resulting in tens of millions of barrels of oil being held at sea.
Iranian officials acknowledge that continuing to pump oil will only be possible for a limited time, as it depends on whether they can withstand the economic pain compared to the United States, including the impact of higher oil prices.
Maintaining a presence in the market
Nevertheless, Iran has previously demonstrated its ability to maintain its presence in the market by keeping up with buyers, even through one-sided communication such as sending holiday greetings despite restrictions that prevented customers from responding to them.
Brett Erickson, managing partner at Obsidian Risk Advisors, said: “Washington is operating on the assumption that Iran will stand idly by and collapse under this pressure within a predictable timeframe. This demonstrates a fundamental misunderstanding of how regimes behave under sustained economic pressure. They don’t collapse; they adapt.”
Risks of reduced production on wells
Reducing production carries risks, as oil storage tanks rely on stable pressure, and an ill-considered shutdown of wells could cause permanent damage—a scenario the White House is banking on. The Iranian economy is also facing turmoil, with the currency hitting a record low against the dollar this week, while war damage to industries like steel and plastics has driven up consumer prices, prompting the government to curtail some non-oil exports.
However, officials insist they can manage the turmoil temporarily, given the country’s long-standing reliance on what is known as a “resistance economy,” based on enduring and absorbing American pressure rather than pursuing traditional growth.
The official said the country has already begun reducing crude production, without specifying the size of the cut, noting that the move could affect up to 30% of oil reservoirs, but remains manageable thanks to past experience.
Husseini, who earlier this week had expressed doubts about a production cut, explained: “We know which wells are suitable for this application in a way that avoids any damage and allows us to resume production quickly.”
The state-owned National Iranian Oil Company did not respond to several requests for comment.
When will Iran's oil storage capacity run out?
There is no precise consensus on how long this strategy can continue before Iran's tanks are completely filled, the point at which storage capacity is exhausted and the wells must be shut down.
Trump predicted last Sunday that the country's oil infrastructure would explode within three days, a deadline that has already passed. Officials familiar with Iranian energy policy say the country now has a rapidly shrinking window of roughly a month, at current production levels, before its storage capacity runs out. JPMorgan and Kpler have reached similar conclusions.
Under sanctions pressure during Trump’s first administration—and with access to a wider base of potential buyers, tankers, and foreign ports to offload the surplus—Iran was able to keep its wells running enough to avoid reaching the point of full tanks, according to Mayad Maleki, who was an official in the U.S. Treasury Department’s Office of Foreign Assets Control and is currently a senior fellow at the Foundation for Defense of Democracies.
But this time, he believes it will be much more difficult. He said, You've never had to experience what a real forced well shutdown looks like.
Oil storage on tankers
Since the embargo came into effect on April 13, Iran has increasingly resorted to storing oil on tankers, with a growing number of tankers, some dilapidated and old, gathering off Kharg Island, the main export hub.
Bloomberg reported last month that empty tankers continued to sail to the Gulf in the days following the US announcement of the blockade.
According to Kpler, 18 tankers loaded Iranian oil in the Persian Gulf and the Gulf of Oman this week, with a total capacity of up to 35 million barrels of crude. Loading continued on Saturday, according to satellite data reviewed by Bloomberg, although the number has declined in recent days.
Pressure on oil infrastructure
The increased number of ships reflects a sharp decline in outflows from the Gulf. Recorded loadings have decreased since the start of the blockade, although the data can be difficult to interpret and often comes with a delay.
US Treasury Secretary Scott Bisent wrote on the X platform this week that Kharg Island is nearing its maximum capacity. He said this situation will cost Iran $170 million a day in lost revenue and push it back to the negotiating table.
Antoine Half, co-founder and senior analyst at Kayrros, said: There appears to be a significant slowdown in production. There is pressure on the system.
What happens after the oil storage tanks are full?
If storage facilities become completely full, Iran will have no choice but to reduce production by the amount of oil it can no longer export. Based on pre-war domestic consumption of approximately two million barrels per day, this would leave the fields operating at roughly half their capacity.
Land transport to countries such as Türkiye, Pakistan, Afghanistan and Uzbekistan is another alternative, with a capacity ranging between 250,000 and 300,000 barrels per day, according to Hosseini.
But resorting to more innovative options may become more difficult, including transporting some petroleum products by rail to China, the largest buyer of Iranian oil. Connecting Tehran to cities like Yiwu and Xi'an is faster than sea transport but less cost-effective, posing a challenge for private Chinese refineries that rely on discounted crude and operate on thin margins.
The U.S. Treasury Department imposed sanctions this week on dozens of individuals accused of running a shadow banking network for Iran. Among those targeted, according to Bisent, are private refineries known as teapots.
Circumventing restrictions
Currently, reducing production may give Iran more room to manage restrictions and maintain its ability to increase production again if conditions improve, according to Half.
Even before the embargo, Iran’s oil sector remained resilient, with production reaching about 3.2 million barrels per day in March, while exports remained close to pre-war levels, according to data compiled by Bloomberg based on ship tracking and consultant estimates.
The country also retains significant tanker capacity—approximately 37 supertankers—both within and outside the blockade. Overall, Iran possesses a floating storage capacity of between 65 and 75 million barrels, according to Vortexa, much of which is concentrated on tankers operating within the Gulf.
This capacity may give Iran some time, but the duration will depend on how strictly the United States enforces the embargo.
Ultimately, Iran built its oil export infrastructure on a foundation of resilience, according to Claire Jungman, director of maritime risk and intelligence at Vortexa. Through floating storage, ship-to-ship crude transfers, and the use of older tankers, the country has multiple tools at its disposal to maintain the flow of oil.
She said: This allows for continued flows in the near term, even with the tightening of the blockade. She added that the ability of ships to return to the Gulf to reload will be a crucial factor, and we can describe this as a restricted but functioning system, not a complete shutdown.
