Shell CEO says oil market is short 1 billion barrels due to Iran war
The oil market is facing an oil shortage of around 1 billion barrels, which will worsen with each day the conflict in the Middle East drags on. Shell CEO Wael Sawan told investors on Thursday.
“The reality is that we have now dug ourselves into a hole of close to a billion barrels of crude oil shortages, either due to barrels being locked up or barrels not being produced,” Sawan said during the London-based oil producer’s first-quarter earnings call.
“And of course this hole gets deeper every day, so the journey back will be long,” Sawan said.
To put that number into context, the entire world consumes approximately 100 million barrels of oil every day, according to OPEC data.
halliburton CEO Jeffrey Miller said in the oilfield services company’s April 21 earnings call that it also estimates oil production lost due to the war is heading toward one billion barrels.
“The recovery of oil and gas production and inventories will not be a quick or simple process,” Miller said.
Small consumption drop
Sawan said the loss of demand due to oil supply losses has been moderate so far. Jet fuel consumption in the airline industry is down about 5%, Shell CEO said.
“What you’re seeing is actually the stark realities of 12 percent of the world’s crude being taken off the market, and you need to be able to counter that,” Sawan told CNBC’s “Money Movers” on Thursday.
The oil market is facing the largest supply disruption in history, according to the International Energy Agency. Iran effectively blockaded the Strait of Hormuz, the narrow sea lane through which about 20% of global oil supplies pass, before the US and Israel attack on February 28.
Oil prices have fallen more than 10 percent since Tuesday on renewed hopes that the United States and Iran will reach a deal to end the war and reopen the strait.
However, it will probably take months for oil exports through the Strait to return to normal after the conflict ends. Strip CEO Mike Wirth told CNBC at the Milken Institute Global Conference on Monday.
Wirth said that the strait must be gradually controlled for mines through a laborious process. There are also hundreds of ships stuck in the Persian Gulf that need to be redeployed around the world to normalize supply chains.
ExxonMobil It will likely take up to two months for oil flows to return to normal once the Strait of Hormuz reopens, CEO Darren Woods said Friday.
The oil market experienced a grace period in March and April, as tankers that had left the Persian Gulf before the war were still heading to their destinations. ConocoPhillips Chief Financial Officer Andrew O’Brien told investors on April 30.
But O’Brien said the tankers have all reached their destinations so far. The executive said the impact of the loss of oil resources in the Middle East will become increasingly evident and fuel shortages may occur in some countries this summer.
“Despite ongoing efforts to manage demand, we will begin to see some import-dependent countries potentially begin to face critical shortages as we enter the June-July time frame,” the ConocoPhillips executive said.
