Disruption to oil exports via the Strait of Hormuz is threatening to delay the market’s return to normal until 2027, Saudi Aramco CEO Amin Nasser warned on Monday.
“The longer the supply disruptions continue, even for another few more weeks, it is going to take a much longer time for the oil market to rebalance and stabilize,” Nasser told analysts on a call to discuss the company’s first-quarter results, which were released on Sunday and beat expectations.
The recovery could drag into 2027 if the situation continues until mid-June, Nasser said.
The impact of the Iran war, including the effective closure of the strait, has already been called the biggest disruption to the energy market in history.
The market is losing around 100 million barrels of oil a week, Nasser said, adding that two to five vessels are crossing the strait daily versus around 70 in normal times.
Even if the strait were to reopen today, it would take months for the market to rebalance, he said.
The disruption has choked off tanker traffic and sent energy prices surging, stoking fears of spiraling inflation and an economic downturn.
RED SEA
Aramco has ramped up exports via the East-West pipeline to the Red Sea port of Yanbu to help sustain some 60-70% of its crude export volumes. Nasser on Sunday called the pipeline a “critical lifeline”.
Nasser said the company was looking at ways to expand Yanbu’s 5 million barrel-per-day export capacity which is handling mainly Arab Light and some Arab Extra Light grades, with heavier ones curtailed.
Via separate western terminals for refined products he said Aramco is exporting almost 900,000 bpd, maximising these exports to capture higher margins, which Nasser said could be the case as long as Hormuz is blocked.
Regarding refineries that have come under attack, Nasser confirmed the SAMREF refinery is fully operational while its SATORP joint venture with TotalEnergies is partially on stream and work is underway to fully restore it.
The Ras Tanura refinery has been restored, though some units are currently undergoing turnaround and should be ready again once that is complete, he said.
Nasser predicted a very robust return to demand growth once normal shipping and trade resume.
“I wouldn’t call it demand destruction. I would call it demand rationing,” he said of the current market.
If needed, Aramco can expect to reach its maximum sustainable capacity of 12 million bpd of crude in less than three weeks, Nasser said.
Reuters has reported that Saudi Arabia cut output by 2 million bpd after Iran blockaded Hormuz, which normally handles a fifth of world supply.
(Reuters)
