Aramco CEO says oil market will take months to normalize due to Hormuz
The CEO of the world’s largest oil company warned on Monday that oil market normalization will take until 2027 if disruption in the Strait of Hormuz continues beyond mid-June.
“If the Strait of Hormuz opens today, it will take months for the market to rebalance, and if its opening is delayed a few more weeks, normalization will take until 2027,” Saudi Aramco CEO Amin Nasser told investors on the company’s first-quarter earnings call.
The United States and Iran appear no closer to a deal that would end the war and reopen Hormuz. President Donald Trump said Monday that a ceasefire with Tehran was on life support after Tehran rejected his counter-proposal to end the conflict.
Before the war, approximately 20% of the world’s oil resources passed through the strait. Since the beginning of March, Iran has managed to essentially close the narrow sea route connecting the Persian Gulf to the global market.
Nasser said the biggest challenge facing the market is the disruption of the global tanker fleet. He said more than 600 ships, mostly oil and product tankers, were currently stranded in the bay.
The CEO said about 240 ships were waiting outside Hormuz. Nasser said some of these ships may go elsewhere because they have been idle in the area for too long.
He said the fleet was “confused” with some tankers being deployed to the wrong locations. He said ships would have to be repositioned from various parts of the world to normalize the supply chain.
“Even in the most optimistic scenario, energy and commodity supply chains would need several months to return to pre-conflict traffic as ships reroute or avoid idling,” Nasser said. he said.
The CEO said that the oil market will lose 100 million barrels of supply every week the strait remains closed. Only two to five ships currently pass through Hormuz per day, compared to 70 before the war.
Nasser said the market has already lost more than 1 billion barrels due to the closure of Hormuz. He said the net loss was around 880 million barrels, thanks to redirected exports through Aramco’s east-west pipeline and the release of strategic reserves by governments.
The east-west pipeline, also known as Petroline, bypasses the Strait of Hormuz by carrying crude oil from Saudi Arabia’s gulf coast to the Red Sea. Nasser said Aramco increased the pipeline’s capacity to 7 million barrels per day.
The CEO said oil stocks are rapidly decreasing, especially for products such as gasoline and jet fuel, due to loss of supply from the Middle East. “This could reach critically low levels ahead of the summer driving and travel season,” Nasser said.
The shipping disruption across the strait has caused the biggest energy supply shock ever, the CEO said. He said the pressure on global supply was “intensifying every day”.
