The Zhitong Finance App learned that Saudi Aramco CEO Amin Nasser said in London on Monday that oil stocks to cushion global supply shocks are “terribly low” and that unless the Strait of Hormuz is reopened, market risks may increase further.
A few days before Nasser made these remarks, the Group of Seven (G7) and its partners decided to release up to 100 million barrels of emergency oil and diesel reserves to mitigate rising fuel costs.
“Until the Strait of Hormuz is fully reopened and market confidence is restored, the harsh reality is that price pressure on both crude oil and refined oil products will increase,” Nasser said at the London Energy Intelligence Forum. “Crude oil supply is already tight, but the price of refined oil products has increased even more.”
Nasser said that releasing inventory will buy some time for various economies, but it will not solve the imbalance between supply and demand. He said that even if Hormuz, a key shipping port, reopens, it may take up to two years for energy consumers to replenish stocks.
Gulf oil producers are making efforts to increase production and export volumes, and have successfully raised crude oil delivery to close to pre-war levels. Saudi Arabia, the United Arab Emirates, Kuwait and other neighboring countries have always used oil tankers to transport crude oil through the Strait of Hormuz. Since the US and Israel attacked Iran at the end of February, triggering a regional war, shipping in the strait has been blocked.
Despite the increase in crude oil flows, there has been limited relief to the oil market, and the market is still digesting the security risks facing supply in the Persian Gulf and Red Sea. Over the past month, the international benchmark Brent crude oil price has remained around $100 per barrel, even as more tankers pass through the Strait of Hormuz.
Saudi Arabia is a key factor in the current increase in crude oil exports. Over the past month, Saudi Aramco increased crude oil shipments from Rastanoura, the main export terminal in the Persian Gulf. The company reacted quickly after last month's attacks temporarily shut down its main international pipeline. Since then, Saudi Aramco has restored the east-west pipeline to about 80% of production capacity, which means the company can also transport more oil from the Red Sea.
Nasser said that Saudi Aramco showed the resilience of its oil supply during the conflict by relying on international storage facilities and quickly repairing damaged infrastructure. In his speech, he did not mention recent reports of attacks on Saudi Arabia.
He said Saudi Aramco is looking for alternative crude oil export routes and more international storage facilities to avoid over-reliance on any single channel to reach global buyers.
As of press release, WTI crude oil futures fell 0.55% to 90.61 US dollars/barrel; Brent crude oil futures rose 0.10% to 102.35 US dollars/barrel.