Aramco CEO calls global oil buffer 'scarily thin' as crude prices stay elevated near $100

The cushion of global oil inventories that protects markets from supply shocks has become "scarily thin," Saudi Aramco's chief executive warned Monday, as crude prices remain elevated near $100 a barrel despite increased flows from Gulf producers.

Speaking at the Energy Intelligence Forum in London, Aramco CEO Amin Nasser said markets face intensifying pressure at both ends of the barrel until the Strait of Hormuz fully reopens. "Until Hormuz fully re-opens and confidence returns, the crude reality is that pressure at both ends of the barrel will intensify," Nasser said. "While the squeeze on crude is serious, refined fuel prices have risen even more sharply."

Global oil stockpiles have fallen sharply since the start of the US-Iran war, Nasser said. At the onset of the conflict, the world held about 10 billion barrels of oil stocks. That has dropped to less than 6 billion barrels, with only about 10% of that volume practically available due to technical constraints, according to Nasser.

The reserve erosion leaves markets with a thin buffer just as demand continues to rise. Nasser said countries will need at least 2 million barrels a day of additional supply for the next two years to rebuild inventories, with the figure potentially higher if governments decide to increase their strategic stockpiles.

Brent crude, the international benchmark, has held around $100 a barrel over the past month, even as more tankers transit Hormuz. The strait has been at least partly obstructed since the end of February, when the US and Israel attacked Iran, 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 waterway, boosting flows to near prewar levels. Those vessels face heightened attack risks, and Saudi Arabia has been repeatedly targeted over the last month.

All of Aramco’s upstream capacity remains intact, Nasser said, allowing the company to continue covering its supply contracts in Europe and Asia. The company has used various export routes, shifted supply between crude grades and pressed its own tankers into operation. Aramco boosted shipments from its main Ras Tanura terminal and restored flows on a cross-country pipeline to about 80% of capacity after a temporary halt from an attack last month.

**Price moves signal market fragmentation**

Aramco set November official selling prices for Asian buyers at the lowest in six years, an unexpected cut that contrasts with a sharp increase for European cargoes. The state-owned firm will sell Arab Light crude to Asian customers at $5 a barrel below the Dubai/Oman benchmark — the widest discount since June 2020, according to Bloomberg data cited by multiple reports. Traders and refiners had expected a price increase, a Bloomberg survey showed.

For European buyers, Aramco raised November prices by $3 a barrel across all grades. Prices for US-bound cargoes were left unchanged.

The divergence reflects surging shipping costs for the Hormuz route. According to Bloomberg and Poten & Partners data reported by a source, freight costs for a very large crude carrier (VLCC) have hit an all-time high of $1.3 million per day — up 43 times from about $30,000 per day in January. These freight costs now add some $33 to the delivered cost of a barrel from the Persian Gulf, versus $1.73 in January. In percentage terms, freight represents 27% of the delivered cost for a VLCC cargo, compared to 3% in January.

Saudi Arabia is using ship-to-ship transfers in the Gulf of Oman to reduce the risk of attacks on larger vessels, shuttling crude from the Persian Gulf on smaller ships that pass through Hormuz and then offloading onto VLCCs.

**Emergency releases deemed insufficient**

Nasser spoke just days after the G7 and International Energy Agency agreed to release up to 100 million barrels of crude oil and petroleum products from strategic reserves over four months, with the first 20 days prioritizing diesel fuel.

The Aramco chief said releasing part of the remaining stockpiles will buy economies some time but won't fix the supply-demand imbalances. The core problem, he said, is that global consumption continues rising and will require sustained additional supply for at least two years.

One source cited Rabobank analyst Michael Every, who characterized the European portion of the release — 50 million barrels drawn from private stocks, not government facilities — as "performative," noting that while it demonstrated the White House's influence over Europe, cheap diesel will remain in short supply.

Nasser said Aramco is studying plans to double or triple the capacity of its storage facilities and is looking for alternative crude export routes to reduce reliance on any single method of reaching global buyers, though he did not provide specifics.