The Oil Mystery Question

The Wall Street Journal discusses the The Oil Mystery at the Heart of America's Pressure Campaign on Iran

It has become a multimillion-barrel mystery at the center of the U.S.-Iran war: How long does Tehran have before it runs out of room to store the oil it can no longer export?

The answer may help determine the outcome of the conflict.

A five-week-old U.S. naval blockade has trapped much of Iran's oil inside the Persian Gulf, forcing Tehran to pump stranded barrels into rapidly filling storage tanks and aboard a flotilla of ships nearby.

U.S. officials are betting that when Iran exhausts places to stash the oil, it will face a costly, high-risk shutdown of its oil fields, forcing Tehran to blink in negotiations over its nuclear program and the wider conflict.

The U.S. government, oil traders and private analysts, however, are divided over exactly how much time Tehran has until it reaches "tank tops," industry parlance for running out of storage.

Estimates of Iran's onshore capacity range widely from 57% to 90% full, meaning Tehran could hit the wall in days—or hold out for weeks. Slowly throttling wells and using idle ships as floating storage are further helping Iran stretch the clock.

Vikas Dwivedi, global energy strategist at Macquarie, estimated that Iran's prewar oil-sales revenue contributed roughly 10% to its gross domestic product.

"So even a total loss is not a catastrophic hit to their GDP, but it is an extremely large hit to their government revenue and the budget for military spending," said Dwivedi.