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Saudi Aramco chief executive Amin Nasser has warned that the world’s oil supply cushion is shrinking. The head of the world’s largest oil company said the Iran war has drained stocks that could help offset further supply disruptions.
The effective closure of the Strait of Hormuz, the narrow waterway that typically handles around 20% of the world’s oil and liquefied natural gas supplies, led to major supply disruptions and higher prices, hitting the global economy.
Seven months into the war, the global oil stockpile system is “already straining,” said Nasser, speaking at the Energy Intelligence Forum in London on Monday.
“And with precious little else the world can turn to, the supply resilience cushion is scarily thin,” he told the two-day conference attended by leaders from across the energy sector.
G7 countries, in coordination with the International Energy Agency (IEA), agreed on Friday to immediately release 100 million barrels of diesel and crude oil to ease global energy supply concerns caused by the US-Iran war.
But Nasser explained that total oil inventories do not reflect the amount of oil that can actually be supplied to the market. “That’s why you find they’re struggling with 100 million barrels.”
But Nasser warned Monday against looking at headline figures for commercial reserves, noting that “less than 10%” were available for use. A large portion of the reserves reported by countries represent the minimum volume required to keep infrastructure operational, he said.
According to Nasser, global oil inventories stood at around 10 billion barrels at the start of the crisis. Since then, nearly 3 billion barrels of oil supply have been lost, or roughly half the crude and refined products that would normally pass through the Strait of Hormuz during that time. More than 1 billion barrels have been withdrawn from global inventories to help offset those losses, with most drawn from onshore commercial inventories.
Nasser described these inventories as “the last major tool in the box”, adding that much of the remaining stock, estimated at less than 6 billion barrels, is “not practically available.”
Nasser said tapping reserves buys the market time but does not fix long-term supply and demand imbalances. He added that these volumes could help the world through one winter, but do not amount to a lasting solution.
He pointed out that rebuilding inventories after the Strait of Hormuz fully reopens could take up to two years.
Regional exports recover as producers use alternative routes
Despite attacks on ships in the Strait of Hormuz, crude oil exports from the Middle East Gulf region, excluding Iran, returned to pre-war levels in September, according to maritime tracking firm Kpler.
“At least 16.5 mbd (million barrels a day) left the region between 1 and 28 September, matching the pre-war average excluding Iran. That is 10.5 mbd above March’s monthly average,” said the firm.
The recovery followed changes to the region’s export routes.
Some 40% of those exports now bypass the Strait of Hormuz, compared with 17% before the war, with pipelines in Saudi Arabia and the United Arab Emirates providing key alternative routes. Most crude crossing the strait changes tankers offshore.
Nasser said Aramco was meeting its customers’ requirements, citing the company’s use of international storage facilities and the speed with which it has repaired infrastructure damaged during the conflict.
Aramco is also seeking additional routes for crude exports and new storage facilities abroad, in order to reduce its reliance on a single channel to reach buyers in global markets.
Saudi oil facilities have been hit by several attacks launched by the Houthis in Yemen since fighting resumed between the Saudi-led military coalition and the Iran-backed Houthi fighters.
Additional sources • وكالات AFP