Aramco CEO Warns of Tight Oil Supply and High Physical Crude Premiums

Saudi Aramco CEO Amin Nasser has highlighted a growing disconnect in the global oil market. While benchmark Brent crude is trading around $100, $103 per barrel, physical crude is selling at premiums of $20, $50 over Brent due to disruptions in the Strait of Hormuz. Nasser emphasized that Aramco's substantial inventories allow it to meet customer demand despite logistical challenges, but he warned that global commercial inventories have been heavily depleted.

The gap between Brent prices and physical crude prices reflects the real-world costs of transporting oil, including extreme tanker freight rates, war-risk insurance, and shipping delays. These factors mean that refineries may face much higher delivered costs than the Brent benchmark suggests. Nasser noted that global commercial inventory has fallen to around 6 billion barrels, though much of this is not immediately available due to operational requirements.

Aramco has cut the November official selling price of Arab Light to Asia by $3 per barrel, aiming to compensate buyers for high freight costs. Meanwhile, prices for northwest Europe have risen by $3 per barrel, highlighting the fragmented nature of the global physical market. Nasser also warned that rebuilding global inventories could take around two years, making the market more sensitive to future disruptions.