Shipping bottlenecks, deep cuts in refinery output and inventory draws that could take years to replace will keep global oil prices high beyond this year, industry executives said at a conference in London on Monday.
Following the start of the US-Israeli war on Iran at the end of February, Iran effectively closed the Strait of Hormuz, choking exports through one of the world’s most crucial shipping bottlenecks.
The impact has been compounded by attacks on oil and gas infrastructure, hampering production and adding to the disruption of exports of crude oil and refined fuels.
“I think it is going to be bedlam for the bulk of the end of the year and maybe 2027,” Petronas CEO Tengku Muhammad Taufik said.
In his first conference address since the start of the Iran war, Amin Nasser, chief executive of the world’s biggest oil company Saudi Aramco, told the Energy Intelligence Forum in London it could take up to two years to refill global stockpiles drawn on as an emergency measure.
“Until Hormuz fully re-opens and confidence returns, the crude reality is that pressure at both ends of the barrel will intensify. Even then, replenishing inventories while meeting demand could take up to two years,” he said. Both ends of the barrel refers to unrefined crude and refined products, such as diesel and jet fuel
He added that 3 billion barrels have been lost since the start of the conflict, and 1 billion barrels have been withdrawn from global inventories.
SIX MILLION BPD FUEL IS MISSING
Kuwait Petroleum Corporation CEO Shaikh Nawaf Al-Sabah said the focus was on moving more refined fuels to global markets and restoring Middle East refineries to full production as the impact of the Iran war has left the world with a shortfall of 6 million barrels per day of refined products.
“There is not enough refining capacity in world to make up for shuttered capacity in Middle East Gulf,” Shaikh Nawaf said.
Kuwait’s crude oil exports have held up at around 1 million bpd this year despite the war-related disruptions, even as production has fallen from around 2.6 million bpd to 2 million bpd, Al-Sabah told the conference.
DEMAND RECOVERY BEYOND NEXT YEAR
ConocoPhillips’ Executive Chair Ryan Lance said it could be 2028 or 2029 before global oil demand recovers from dipping this year due to the current crisis, but added it would grow after that.
The oil price floor for US benchmark WTI crude will rise to around $70 per barrel, Lance said, with a mid-cycle price of $65 to $70 per barrel.
Should prices remain strong, US oil production could exceed 14 million to 14.5 million barrels per day, he said. He did not specify what he meant by strong.
Brent crude futures traded just above $100 per barrel on Monday, while WTI was close to $90 per barrel.
(Reporting by Stephanie Kelly, Shadia Nasralla, Robert Harvey and Anushree Mukherjee; Editing by Joe Bavier, Louise Heavens and Barbara Lewis)