TanzaniaAramco CEO Warns of Thin Oil Inventories
Global oil supply buffer is running low, says Amin Nasser, and replenishing stocks could take up to two years. The CEO of Saudi Aramco also warned that Brent crude could have hit $200 without the East-West pipeline.
Global Newsflix 2 min read
Amin Nasser, the CEO of Saudi Aramco, has warned that global oil inventories are 'scarily thin' and that replenishing them could take up to two years. This comes as the oil market has weathered the immediate disruption caused by the Hormuz crisis, but at the cost of consuming much of its resilience.
Nasser estimates that nearly 3 billion barrels of supply have been lost since the conflict began, with over 1 billion barrels released from strategic and commercial stocks to soften the blow. However, much of what remains in storage is either unavailable or operationally untouchable.
The CEO said that rebuilding inventories will create a fresh source of demand, requiring an additional 2 million barrels per day of demand over the next 18 months while normal consumption continues. This will tighten balances as governments and companies race to rebuild depleted stocks.
Nasser also stated that without the East-West pipeline, Brent crude could have surged to as much as $200 per barrel. The pipeline has allowed Aramco to bring its full sustainable output ceiling of 12 million barrels per day online within a matter of days.
Aramco is pursuing alternative crude export corridors and extra international storage capacity to reduce its dependence on any one route to global customers. The company has also restored volumes on the East-West pipeline to roughly 80% of its capacity, leaving it with additional crude available for shipment from the Red Sea.
The low oil inventories have left markets vulnerable to further deterioration unless the Strait of Hormuz reopens. Nasser cautioned that pressure at both ends of the barrel will only grow unless confidence is restored, with refined fuel costs having climbed even more than crude prices.
The situation has led to a rise in shipping risks and insurance costs, with Aramco exploring new oil export routes through Oman to bypass the Strait of Hormuz. The company's crude deliveries have remained dependable throughout the conflict, thanks to international storage arrangements and rapid repairs to damaged facilities.
Key facts
- Global oil inventories are 'scarily thin', according to Amin Nasser
- Replenishing stocks could take up to two years
- Nearly 3 billion barrels of supply have been lost since the conflict began
- Aramco is pursuing alternative crude export corridors and extra international storage capacity
Three perspectives
Neutral
The warning from Amin Nasser highlights the challenges facing the oil market, with low inventories and high shipping risks. The situation will be closely watched by governments and companies as they try to rebuild depleted stocks. The use of alternative export routes and international storage capacity may help to reduce dependence on the Strait of Hormuz.
Positive
The fact that Aramco has been able to maintain its crude deliveries despite the conflict is a testament to the company's adaptability and strategic planning. The pursuit of alternative export routes and extra storage capacity may also help to reduce the risk of supply disruptions in the future.
Negative
The low oil inventories and high shipping risks have created a volatile market, with prices likely to remain high unless confidence is restored. The situation has also highlighted the vulnerability of the global oil supply chain to geopolitical conflicts and infrastructure disruptions.
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