Saudi Aramco warns global oil inventories are dangerously low and could take up to two years to replenish

[Financial Channel/Comprehensive Report] Global oil supply is facing a test that is not only about "how much oil can be produced every day", but also about how much safety stock is left. Saudi Aramco CEO Amin Nasser warned that after months of war in the Middle East, global oil inventory buffers have become "terribly small." Even if normal traffic in the Strait of Hormuz resumes, it may still take up to two years to "replenish inventories to normal levels" while continuing to meet global demand. "Reuters" quoted Petronas CEO Tengku Muhammad Taufik as saying that the oil market will be in chaos for most of the end of this year, and possibly even into 2027.

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Nasser said at the London Energy Information Forum that before the outbreak of the crisis, the world had a total of nearly 10 billion barrels of oil inventories; since the war, due to obstruction of transportation in the Strait of Hormuz, nearly 3 billion barrels of crude oil and petroleum product supply have disappeared, which is approximately equivalent to half of the amount that should normally be transported through the strait during the same period.

To fill the supply gap, the world has drawn on more than 1 billion barrels of inventories, most of which came from onshore commercial stocks. Nasser pointed out that the current global commercial oil inventory is estimated to be less than 6 billion barrels, and most of them cannot actually be dispatched at any time due to factors such as location, logistics and operational needs. He described commercial stocks as the "last important tool in the toolbox" for energy supply, and now this buffer is thinning rapidly.

Even though exports from the Middle East have gradually recovered, market pressure has not been completely relieved. The Financial Times quoted data as saying that oil exports from Gulf countries in September had rebounded to about 15.5 million barrels per day, the highest since the outbreak of the war, and had returned to more than 80% of pre-war levels. Oil-producing countries such as Saudi Arabia and the United Arab Emirates have managed to bypass some of the risks in the Strait of Hormuz through alternative pipelines, ports and maritime transshipments.

However, the increase in exports did not immediately bring the oil market back to normal. FRED quoted data from the U.S. Energy Information Administration showing that Brent spot crude oil was still trading at US$113.96 per barrel on September 29, and once reached US$119.97 on September 28, reflecting that the market is still highly sensitive to supply security and inventory levels.

Nasser warned that even if the Strait of Hormuz is fully reopened, the market cannot immediately return to pre-war conditions. In addition to normal daily needs that still need to be met, countries and companies must also replenish strategic and commercial inventories that have been consumed in large quantities. Therefore, the replenishment itself may create additional demand and prolong market tensions.

Faced with this risk, Saudi Aramco is studying more crude oil export routes that do not rely on the Strait of Hormuz, and is also considering adding overseas oil storage facilities to improve its resilience in the face of future supply disruptions. Saudi Arabia's east-west pipeline is particularly important in this crisis, allowing some crude oil to be exported via the Red Sea, preventing Saudi Arabia's exports from completely relying on the Persian Gulf route.

On the other hand, high oil prices also bring another result. Robin Brooks, a senior researcher at the Brookings Institution, estimates that before the war, when Saudi Arabia exported about 7 million barrels per day and Brent crude oil was about US$60, its annualized oil export revenue was about US$150 billion; now even if the export volume is only about 5.5 million barrels per day and the oil price is about US$105, the annualized revenue may still rise to about US$210 billion, which is about US$60 billion more than before the war.

Brooks therefore believes that the increase in oil prices has been enough to offset the decline in exports, and this increase in revenue is equivalent to approximately 6% of Saudi Arabia's GDP. However, this is an estimate he made based on oil prices and export volumes, rather than the actual revenue figures announced by the Saudi government.

For the global oil market, the biggest question at hand is not just when the Strait of Hormuz will return to normal, but how long it will take for the oil inventories that have been heavily consumed in the past few months to be replenished. Even if supply gradually recovers, as long as global safety stocks remain low, any new transportation or production disruptions could again amplify price fluctuations.

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