The amount of oil in storage that is accessible to the global market is running low, industry executives said at a forum in London this week, making the market more fragile and putting upward pressure on prices.
Governments and energy companies have drawn oil from stockpiles to alleviate pressure in a global oil market facing unprecedented supply disruptions this year due to the wars in the Middle East and Ukraine.
“Less than 6 billion barrels of commercial inventories remain today, with the vast majority not practically available, so the system is already straining,” Amin Nasser, CEO of Saudi Arabia’s state oil company Saudi Aramco, said at the Energy Intelligence Forum in London.
More than 1 billion barrels of oil have been released mainly from onshore commercial inventories since the start of this year’s Middle East crisis, which was the last major tool in the box, Nasser said.
The International Energy Agency, the West’s oil watchdog and coordinator of its strategic oil reserves, is preparing to release 100 million barrels of crude and diesel to help alleviate soaring diesel prices, but it is not clear if some of that total will include volumes from its record first 400 million barrel release in March that hadn’t hit the market yet.
“It took a lot of negotiations, but it is 100 million,” Nasser said of the IEA decision. “Inventories are reaching a stress level. Only 10% or less is available, that’s why they struggle with 100 million barrels.”
World oil demand is about 102 million barrels per day, according to the IEA.
SUPPLY RESILIENCE CUSHION IS SCARILY THIN
The loss of the oil market’s buffers has made the market more fragile, Chevron CEO Mike Wirth said on Tuesday, adding that this has increased oil’s price floor.
Oil market turmoil will continue beyond next year, executives said at the conference on Monday, as it could take years to refill inventories on top of meeting global demand.
Not all oil in storage is immediately usable because of operational factors like tank bottoms or oil sat in pipelines, as well as political factors like government rules dictating minimum levels of emergency stocks.
There is huge demand to build additional inventories around the globe, Nasser added. Kuwait Petroleum Corporation CEO Shaikh Nawaf Al-Sabah said his company is aiming to build out storage domestically and at its overseas refineries.
The world is reliant on the seaborne oil exports escaping the Middle East “to keep things in balance as we go through winter, because there aren’t any more inventories to drain in the West,” the CEO of commodities trader Vitol Russell Hardy said.
Stocks of crude oil in the U.S. Strategic Petroleum Reserve are at their lowest since October 1982, according to data from the Department of Energy.
Natural gas inventories are also depleted, making prices vulnerable to spikes. A bad winter could bring about a “bloodbath” in the gas market in the first quarter of 2027 if storage hits minimal levels, Petronas CEO Tengku Muhammad Taufik said.
(Reporting by Robert Harvey, Stephanie Kelly and Shadia Nasralla in London, editing by Alex Lawler and Nick Zieminski)