Saudi Arabia’s state oil company has warned of “catastrophic consequences” for global oil markets if the US-Israel war with Iran continues to block shipping in the Strait of Hormuz.
The world’s biggest oil company expects to be able to export around 70% of its usual crude output despite the stranglehold on the vital trade artery, but its chief executive warned there would still be “drastic” consequences for the global economy if the disruption continues.
Oil shipments from the Middle East have been blocked from passing through the narrow waterway since the US attacks on Iran 11 days ago, wiping around 20 million barrels of oil from the global market each day.
Amin Nasser, Aramco’s chief executive, said: “While we have faced disruptions in the past, this is by far the biggest crisis the region’s oil and gas industry has faced.”
Aramco has been unable to ship crude cargoes out of the Gulf because of the disruption, but hopes to meet customer demands by flowing crude through the east-west pipeline to the Red Sea port of Yanbu, where it could be shipped to buyers.
The company plans to increase shipments through the pipeline to reach its full capacity of 7 million barrels per day in the coming days, he said. About 2 million barrels per day will be sent to Saudi Arabia’s refineries in the west of the country, leaving 5 million barrels per day for the global crude market. This represents around 70% of the kingdom’s usual exports.
Typically, about 100 tankers pass through the narrow waterway south of Iran a day, but the number has dropped to single digits after the Islamic Revolutionary Guard Corps threatened to “set fire” to any ships using the trade route, which carries a fifth of the world’s oil and liquefied natural gas.
Aramco said it is now meeting most of its customers’ needs, in part by tapping crude oil stored outside the Gulf region. He said these stores will not be able to be used for “an extended period of time, but for the moment we are taking advantage of it.”
The disruption caused global oil market prices to rise to highs of $119 a barrel this week, the highest price since 2022 when Russia invaded Ukraine, raising fears for the global economy. Brent crude oil was trading at around $91 on Tuesday.
Nasser said: “There would be catastrophic consequences for the world’s oil markets, and the longer the disruption lasts… the more drastic the consequences will be for the global economy.”
G7 finance ministers met on Monday to discuss plans to release emergency crude reserves held by global governments to help moderate rising oil prices. However, there was no agreement to go ahead with the launch, which has happened only five times in the history of the market.
