Saudi Aramco CEO says oil market won't normalize until 2027 if Hormuz disruption persists
by Spencer Kimball · CNBCKey Points
- The oil market will not normalize until 2027 if the disruption in the Strait of Hormuz persists past the middle of June, Saudi Aramco CEO Amin Nasser said.
- The biggest challenge facing the market is the disruption to the global tanker fleet, Nasser said. The fleet is "mixed up" with tankers in the wrong places, he said.
- The oil market will lose 100 million barrels of supply every week Hormuz is closed, the CEO said. The total net loss so far is 880 million barrels.
The oil market will take until 2027 to normalize if the disruption in the Strait of Hormuz persists beyond the middle of June, the CEO of the world's largest oil company warned Monday.
"If the Strait of Hormuz opens today, it will still take months for the market to rebalance, and if its opening is delayed by a few more weeks, then normalization will last into 2027," Saudi Aramco CEO Amin Nasser told investors on the company's first-quarter earnings call.
The U.S. and Iran do not appear any closer to a deal to end the war and reopen Hormuz. President Donald Trump said Monday the ceasefire with Tehran is on life support after he rejected its counterproposal to end the conflict.
About 20% of the world's oil supplies passed through Hormuz before the war. Iran has managed to basically close the narrow sea lane, which connects the Persian Gulf to the global market, since early March.
The biggest challenge facing the market is the disruption to the global tanker fleet, Nasser said. More than 600 ships, mostly oil and product tankers, are currently stuck in the Gulf, he said.
Around 240 ships are waiting outside Hormuz, the CEO said. Some of these ships may leave to other places because they have been idling in the region for too long, Nasser said.
The fleet is "mixed up" with some tankers deployed in the wrong places, the CEO said. Ships will need to be repositioned from certain parts of the world to normalize the supply chain, he said.
"Even in the most optimistic scenario, energy and commodity supply chains will need several months to return to the pre-conflict traffic as vessels reroute or avoid being idle," Nasser said.
The oil market will lose 100 million barrels of supply every week Hormuz remains closed, the CEO said. Just two to five ships pass through Hormuz daily right now compared with 70 vessels before the war, he said.
The market has already lost more than 1 billion barrels due to the Hormuz closure, Nasser said. The net loss is around 880 million barrels thanks to redirected exports through Saudi's East-West pipeline and the release of strategic reserves by governments, he said.
The East-West pipeline bypasses Hormuz by transporting crude to the Red Sea from Saudi's Gulf coast. Aramaco has ramped up the pipeline's capacity to 7 million barrels per day, Nasser said.
Oil inventories are rapidly drawing down, particularly for products like gasoline and jet fuel, due to the supply loss from the Middle East, the CEO said. "This may reach critically low levels ahead of the summer driving and travel season," Nasser said.
The disruption to shipping through the strait has caused the biggest energy supply shock ever, the CEO said. The strain on global supplies "intensifies with each passing day," he said.