Oil Supply Deficits to Persist for Years Amid Shipping Bottlenecks

Global oil markets are facing prolonged supply deficits due to persistent shipping bottlenecks and other disruptions, according to industry leaders speaking at a conference in London. The closure of the Strait of Hormuz by Iran, following the start of the US-Israeli war on Iran in late February, has severely constrained oil exports through this critical shipping lane. Compounding the issue are attacks on oil and gas infrastructure, which have further disrupted production and exports of crude oil and refined fuels.

Petronas CEO Tengku Muhammad Taufik described the situation as "bedlam" that could last through the end of this year and possibly into 2027. Saudi Aramco CEO Amin Nasser warned that replenishing global stockpiles, which have been drawn down as an emergency measure, could take up to two years. Nasser also noted that three billion barrels have been lost since the conflict began, with one billion barrels withdrawn from global inventories.

Kuwait Petroleum Corporation CEO Shaikh Nawaf Al-Sabah highlighted a global shortfall of six million barrels per day of refined products. He emphasized the lack of sufficient refining capacity worldwide to compensate for the shuttered facilities in the Middle East. Despite war-related disruptions, Kuwait's crude oil exports have remained steady at around one million barrels per day, even as production has dropped from 2.6 million barrels per day to two million barrels per day.

ConocoPhillips Executive Chair Ryan Lance projected that global oil demand might not fully recover until 2028 or 2029, following a dip this year due to the current crisis. He predicted that the oil price floor for US benchmark WTI crude will rise to around $70 per barrel, with a mid-cycle price range of $65 to $70 per barrel. If prices remain strong, US oil production could exceed 14 million to 14.5 million barrels per day.