The CEO of Saudi Arabia’s national oil company has indicated that the energy industry will take a significant amount of time to bounce back from disruptions caused by the conflict in Iran. Ongoing transport issues in Iran are impacting oil production, particularly through the Strait of Hormuz.
Amin Nasser, the Chief Executive of Saudi Aramco, revealed in a recent earnings call that the global energy market has lost around 1 billion barrels of oil during this crisis. However, some relief has come from efforts to reroute shipping away from the Strait of Hormuz and using strategic oil reserves from various countries.
“The energy supply shock that started in the first quarter is unprecedented,” Nasser stated.
He mentioned that the world is currently missing about 100 million barrels of oil supply each week as long as tanker traffic remains mostly blocked in the Strait of Hormuz. If disruptions continue, Aramco predicts that oil market normalization might not happen until as late as 2027.
Nasser emphasized that reopening shipping lanes does not equate to normalizing a market that has been deprived of such a large volume of oil. He also noted that years of underinvestment have only worsened the turmoil caused by the conflict.
In light of these challenges, Aramco has increased its usage of pipelines that run across the Arabian Peninsula, bypassing the need for oil tankers. Nasser stated that before the conflict, around 20% of the world’s oil supply passed through the Strait of Hormuz.
“Our East-West Pipeline, now at full capacity with a production rate of 7 million barrels per day, is proving to be a crucial support system that can help mitigate the impact of global energy shocks,” he explained during a call.
Nasser also mentioned ongoing assessments to expand export capacity at the pipeline’s endpoint at the Red Sea terminal in Yanbu.
Despite Saudi Arabia cutting its crude oil output by 2 million barrels per day, the tensions surrounding shipping traffic in the Strait of Hormuz remain a significant challenge for the global oil market.
