Aramco Warns of Dangerously Thin Global Oil Supply Cushion

Saudi Aramco has issued a stark warning about the perilously low levels of global oil reserves, exacerbated by ongoing disruptions in the Middle East. The CEO of Aramco, Amin Nasser, highlighted that the release of oil from strategic reserves by the G7 nations, up to 100 million barrels, can only provide temporary relief and does not address the deeper, long-term supply issues.

The Strait of Hormuz remains closed, a critical bottleneck that has slashed global oil reserves by nearly 30% since the conflict between the US, Israel, and Iran began in February. Nasser emphasized that the global oil supply resilience cushion is now "frighteningly thin," with approximately 3 billion barrels of oil supply lost. Even if the Strait of Hormuz reopens, it will take up to two years to fully rebuild reserves, leaving the market vulnerable to further shocks.

The G7's decision to tap into strategic reserves aims to ease upward pressure on fuel prices, but Nasser cautioned that this is merely a temporary measure. The underlying issue remains the lack of new production capacity and the inability to restore lost oil volumes. Meanwhile, former US President Donald Trump's threat to ban American diesel exports adds another layer of pressure on European countries, which rely heavily on imported energy products.

The broader concern, as outlined by Aramco, is that the global energy system has lost a significant portion of its safety margin. Without an adequate cushion, any new geopolitical, military, or supply chain disruption could trigger extreme price volatility. The oil market, Nasser warned, now has minimal room to absorb additional shocks.