Aramco Warns of Two-Year Wait to Replenish Global Oil Stockpiles

Saudi Aramco's CEO, Amin Nasser, warned that replenishing global crude oil and refined fuel stockpiles could take up to two years. The warning comes amid a tightening supply squeeze triggered by the closure of the Strait of Hormuz following the US-Israeli war on Iran. Nasser emphasized that even after the strait reopens, rebuilding inventories while meeting demand will remain a significant challenge. He noted that the world has lost nearly 3 billion barrels of oil supply since the conflict began, with 1 billion barrels already released from global stocks.

Nasser highlighted that global daily oil demand is just over 100 million barrels per day (bpd), and refilling inventories would require an additional 2 million bpd of demand over the next 18 months. Saudi Arabia's maximum sustainable production capacity of 12 million bpd could be made available within days, but much of the remaining 6 billion barrels in storage is not practically accessible. Up to 90% of this oil is either in pipelines or needed to maintain storage tank operations.

To mitigate supply pressures, Saudi Arabia is exploring alternative export routes. The East-West pipeline allows oil to be moved to Red Sea terminals, bypassing the Strait of Hormuz. Nasser stated that without this pipeline, Brent crude futures could have surged to $200 per barrel. Currently, Brent futures trade around $102 per barrel, down from a peak of $126 per barrel in late April. Aramco is also studying additional export routes and utilizing more overseas storage to manage short-term disruptions.

Nasser assured that Aramco is meeting customer demands and working on new export routes to reduce reliance on a single chokepoint. He emphasized that multiple adaptable export routes can minimize the risk of system paralysis. Despite the challenges, Saudi Arabia's strategic reserves and system flexibility remain intact, providing some buffer against the current supply strains.