Saudi Aramco CEO Amin Nasser warned Monday that the world has lost nearly 3 billion barrels of gross oil supply since the Iran war began, equivalent to roughly half the crude and products that normally would have moved through the Strait of Hormuz over the same period, leaving global inventories “scarily thin” even as crude flows from the Middle East recover.
The world entered the crisis with almost 10 billion barrels of oil stocks, according to Nasser, but more than 1 billion barrels have since been drawn from inventories to offset supply losses. Most of those barrels came from onshore commercial stocks, leaving less than 6 billion barrels in commercial inventories, the vast majority of which Nasser said is not practically available.
“The system is already straining,” Nasser told the Energy Intelligence Forum in London. “And, with precious little else the world can turn to, the supply resilience cushion is scarily thin.”
Nasser also said Brent could have reached $200 per barrel without Saudi Arabia’s East-West pipeline, according to Bloomberg and The National. The pipeline allows Saudi Arabia to move crude from its eastern oilfields to the Red Sea, bypassing the Strait of Hormuz. Aramco has restored flows on the route to about 80% of capacity following an attack last month, The National reported.
Nasser said replenishing inventories while continuing to meet global demand could take as long as two years even after the Strait of Hormuz fully reopens.
His warning follows the G7’s decision to release as much as 100 million barrels of emergency oil and diesel stocks over the next four months. IEA members have already released around 325 million barrels of the 400 million barrels pledged in March. It remains unclear how much of the latest G7 commitment will be additional to the original IEA release.
“Emergency reserves might buy us a winter,” Nasser said. “They cannot fix long-term supply.”
Aramco is now studying additional crude export routes and more overseas storage to reduce its dependence on individual shipping corridors. Nasser said the company can also make its full 12 million bpd of sustainable production capacity available within days, according to The National.
By Michael Kern for Oilprice.com
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