Saudi Oil CEO on Recovery Timeline Amid Iran Conflict
The head of Saudi Arabia’s national oil company has indicated that the energy sector faces a prolonged recovery due to supply disruptions caused by the conflict with Iran. These disruptions have significantly affected oil production in the region.
Amin Nasser, CEO of Saudi Aramco, mentioned in a recent earnings call that approximately 1 billion barrels of oil supply have been lost worldwide during this ongoing crisis. He noted that although some supply issues have been mitigated by rerouting shipping traffic and releasing strategic reserves, the situation remains critical.
“This energy supply shock is unprecedented,” Nasser stated. He highlighted that the world is currently losing around 100 million barrels each week, particularly while access through the Strait of Hormuz remains restricted. If these disruptions continue for several weeks, he believes normalization of the oil market may not occur until 2027.
Nasser stressed that simply reopening shipping routes won’t restore a market that has lost such a substantial amount of oil. He pointed out that years of underinvestment have further intensified conflicts surrounding the global oil supply chain.
“Recent events have made it abundantly clear how essential oil and gas are for energy security and the economy,” he added. It’s a stark reminder of the need for reliable energy sources.
In response to the ongoing situation, Aramco has increased its utilization of pipelines that traverse the Arabian Peninsula, which circumvents the need for oil tankers. Prior to the conflict, about 20% of global oil supplies moved through the Strait of Hormuz.
Nasser noted, “Our East-West Pipeline has hit its maximum production capacity of 7 million barrels per day. This pipeline serves as a crucial supply route that helps cushion the global energy shock, alleviating some of the pressure from shipping disruptions in the Strait of Hormuz.”
Regarding the pipeline’s throughput, Nasser mentioned that out of the 7 million barrels per day it handles, roughly 2 million barrels go to a refinery on the western coast of Saudi Arabia, while the remaining 5 million barrels are available for export.
He also indicated that Aramco is exploring options to enhance export capacity at its terminal in Yanbu, which is situated on the Red Sea.
Notably, Saudi Arabia has reduced its oil production by 2 million barrels per day following Iran’s threats to shipping traffic in the Strait of Hormuz, effectively shutting down a pivotal transport route.
