Oil Executives Warn of Dwindling Shock Absorbers as Iran War Continues

Oil industry leaders have raised alarms that the market's ability to absorb the disruptions caused by the Iran war is dwindling as the conflict approaches its eighth month. Speaking at the Energy Intelligence Forum in London, executives warned that while the market has so far managed the strain, the available shock absorbers are nearing exhaustion. The war has significantly disrupted shipping through the Strait of Hormuz, a critical choke point that typically handles one-fifth of the world's oil and liquefied natural gas. Despite this, benchmark crude futures have only seen modest increases, with Brent trading below $100 a barrel on Tuesday.

Producers and consumers have deployed a range of measures to mitigate the impact, including demand reductions, increased supplies from other regions, and substantial releases from strategic petroleum reserves. Tanker transits through Hormuz have recently risen, but executives emphasize that the situation remains fragile. Shell CEO Wael Sawan cautioned that the current strategies cannot sustain indefinitely without further disruptions emerging. Similarly, Vitol Group CEO Russell Hardy noted that the market needs 10 to 14 million barrels to move through Hormuz to maintain balance through the winter, with no additional inventories left to drain in the West.

The pressure is particularly acute in refined fuels and shipping. Last week, a group of nations announced a plan to release 100 million barrels of oil to ease price pressures, following an earlier release of 400 million barrels this year. Global stockpiles, especially of refined fuels like diesel, are expected to continue declining in the coming months. Saudi Aramco CEO Amin Nasser highlighted that while the crude oil squeeze is serious, refined fuel prices have risen even more sharply, and emergency reserves can only provide temporary relief.