Saudi Aramco Chief Executive Amin Nasser has warned that global reserve stockpiles meant to cushion oil supply disruptions have fallen to very low levels. He said oil markets could face serious turmoil unless shipping traffic through the Strait of Hormuz returns to normal.
Nasser described the situation as “uncomfortably low,” warning it could trigger a sharp rise in oil product prices. He said that while governments releasing reserves onto the market could ease pressure in the short term, this would not close the gap between supply and demand.
According to the Aramco chief, even if oil shipments through the Strait of Hormuz return fully to normal, it could take governments around two years to rebuild their reserves to previous levels.
Nasser said that during the confrontation between Israel and the United States with Iran, the company managed to keep its supply chains running by drawing on oil stored at overseas depots and quickly restoring facilities that had been damaged. Aramco is now exploring new export routes and working to build additional storage capacity abroad to reduce its dependence on any single transit route.
He noted that disruption in the Strait of Hormuz could also hit global food markets hard, since roughly a third of the world’s fertilizer supplies pass through the waterway. International Chamber of Commerce Secretary General John Denton said that capacity for fertilizer production and delivery has already shrunk by about 40%, with the global market losing close to 2.7 million tons of product.
The United Nations has previously warned that closure of the Strait of Hormuz could deal a severe blow to the global economy and food security.
