Oil supply buffer 'scarily thin' as Hormuz risks persist, Aramco CEO warns; prices cut for Asia

**LONDON (The Wiregazette)** — Global oil stockpiles have fallen to dangerously low levels, putting markets at risk of tightening further unless shipping through the Strait of Hormuz fully resumes, according to the head of the world's largest crude exporter.

Amin Nasser, chief executive of Saudi Aramco, said Monday at the Energy Intelligence Forum in London that the world's oil buffer has become "scarily thin." He warned that "until Hormuz fully re-opens and confidence returns, the crude reality is that pressure at both ends of the barrel will intensify."

"While the squeeze on crude is serious, refined fuel prices have risen even more sharply," Nasser said, according to multiple reports.

His comments came days after the Group of Seven nations, in coordination with the International Energy Agency, announced plans to release as much as 100 million barrels of crude oil and petroleum products from strategic reserves over four months to ease rising fuel costs. The G7 specifically noted an initial priority on diesel drawdowns, according to a TASS report.

Nasser said releasing emergency stocks will buy economies some time but will not fix the underlying supply-demand imbalance.

**Inventories slashed**

Global oil inventories stood at about 10 billion barrels when the U.S.-Iran war began, Nasser said, according to Bloomberg. That figure has since fallen to less than 6 billion barrels, of which only about 10% is practically available due to technical restrictions, he said.

Consumption of crude continues to rise, Nasser stated, and countries will require additional supply for at least the next two years to rebuild inventories. That could mean extra demand of at least 2 million barrels per day, or more if governments decide to increase the amount of oil they hold in stockpiles.

The Strait of Hormuz has been at least partly obstructed since the U.S. and Israel attacked Iran at the end of February, triggering a regional war. Gulf producers including Saudi Arabia, the United Arab Emirates and Kuwait have been using their own tankers to ship crude through the chokepoint.

These flows have boosted crude exports to near prewar levels, Nasser said, but have provided scant relief for oil markets, which continue to price in security risks in the Persian Gulf and Red Sea. Brent crude, the international benchmark, has traded around $100 a barrel over the past month even as more tankers transited Hormuz. Vessels have faced heightened attack risks, and Saudi Arabia has been repeatedly targeted.

**Aramco maintains capacity, adjusts pricing**

All of Aramco's upstream capacity remains intact, Nasser said, allowing the company to continue covering supply contracts with buyers in Europe and Asia. Aramco has used various export routes, shifted supply between crude grades and pressed its own tankers into operation.

Over the past month, Aramco boosted crude shipments from its main export terminal at Ras Tanura in the Persian Gulf. The company also reacted quickly to a temporary halt to its main cross-country pipeline after an attack last month, restoring flows to about 80% of capacity.

In a sign of the shifting market dynamics, Aramco unexpectedly cut its official selling prices for Asian buyers for November to the lowest in six years, according to Bloomberg data reported by multiple outlets. The price for Arab Light crude to Asia was set at a $5-per-barrel discount to the Oman/Dubai benchmark, the widest since June 2020.

Traders and refiners had expected a $5 increase from October, according to a Bloomberg survey cited by Zero Hedge. The actual cut amounts to a $3-per-barrel swing, the report said.

In contrast, Aramco raised November prices for European buyers by $3 a barrel across all grades, while leaving U.S. prices unchanged.

**Freight costs surge**

The price moves come as freight costs for shipping crude out of the Persian Gulf have surged due to the Hormuz situation, according to Bloomberg data cited by Zero Hedge. Very large crude carrier rates have reached an all-time high of $1.3 million per day, up 43 times from about $30,000 per day in January.

Freight costs now add approximately $33 to the price of a barrel shipped from the Persian Gulf, compared with $1.73 in January, data from Poten & Partners showed. In percentage terms, freight now represents 27% of the delivered cost for a VLCC cargo, versus 3% in January.

Saudi Arabia is using ship-to-ship transfers in the Gulf of Oman to reduce the risk of Iranian attacks on vessels carrying its crude, according to reports. Smaller vessels pick up crude in the Persian Gulf, pass through Hormuz, and offload onto larger tankers waiting off Oman. This oil-shuttling has boosted transportation costs.

Nasser said Aramco is looking for alternative crude export routes to avoid relying too heavily on any single method of reaching global buyers, without providing specifics. The company is studying plans that would double or triple the capacity of its storage facilities, he said.

**Market outlook**

The combination of thin global inventories, persistent geopolitical risk in the Persian Gulf, and soaring freight costs is keeping energy markets on edge. Nasser's warning that the supply buffer is "scarily thin" underscores the fragility of the current balance, even as Gulf producers manage to maintain near-prewar export volumes.

With governments turning to strategic releases as a temporary measure and demand expected to remain robust, the pressure on both crude and refined product prices is likely to continue until Hormuz shipping returns to full normalcy and confidence is restored.