Aramco warns oil shock has erased 2.6bn barrels

The global oil market has lost more than 2.6 billion barrels since the US-Israeli war with Iran began on February 28, Saudi Aramco chief executive Amin Nasser has said, warning that depleted inventories will take more than a year to rebuild.
The cumulative loss is equivalent to nearly one month of worldwide oil consumption and reflects the prolonged disruption of shipping through the Strait of Hormuz, the strategic waterway connecting Gulf producers with international markets. Crude oil, refined fuels and liquefied natural gas normally pass through the strait in vast quantities.

Nasser said the figure represented barrels removed from normal market supply. Emergency stock releases and alternative export routes had reduced the net shortfall to about 1.8 billion barrels, but the remaining gap had left commercial and government inventories under severe pressure.

Even an immediate reopening of the strait would not restore the market quickly. Replenishing the lost stocks at an average rate of 2.1 million barrels a day could take about 18 months, leaving consumers exposed to further price increases if another major supply disruption occurs.

The warning came as Aramco reported second-quarter net income of $32.69 billion, up 44 per cent from the same period a year earlier. Higher crude prices more than offset lower export volumes and the operational costs imposed by the conflict.

The company maintained its quarterly base dividend at roughly $21.9 billion, preserving a crucial source of revenue for Saudi Arabia, which remains Aramco’s controlling shareholder. The payout is central to government finances and supports the kingdom’s spending on infrastructure, tourism, technology and economic diversification.

Oil prices surged after the war began, with Brent crude at one stage climbing above $120 a barrel as shipping through Hormuz almost stopped. Prices have since retreated amid diplomatic efforts to secure limited passage and expectations that some exports could resume, although they remain above levels recorded before the conflict.

Brent traded close to $80 a barrel this week, while West Texas Intermediate stood near $76. Market volatility has persisted because traders remain uncertain about the durability of negotiations and the security of tankers, ports and pipelines across the region.

The Strait of Hormuz handled about one-fifth of global petroleum consumption before the war. Saudi Arabia and the United Arab Emirates possess pipelines capable of bypassing the waterway, but their capacity is insufficient to replace all the crude and fuel normally transported through it.

Aramco increased flows through Saudi Arabia’s East-West Pipeline, which carries oil from fields in the east to the Red Sea coast. The system reached its maximum capacity of about seven million barrels a day during the first quarter, enabling the company to continue supplying customers despite restrictions on Gulf shipping.

Nasser said Aramco could restore production to pre-war levels within days once transport conditions stabilised. Output could reach 12 million barrels a day within three weeks, supported by spare capacity, storage facilities and an extensive network of domestic pipelines.

The company has also relied on inventories stored outside the Gulf and adjusted cargo destinations to maintain deliveries. Its integrated trading and refining operations have provided additional flexibility as buyers sought alternatives to supplies delayed or stranded by the conflict.

Global emergency reserves have played a major role in limiting the disruption. Energy-consuming nations agreed in March to make 400 million barrels available, the largest coordinated stock release on record. The intervention helped provide crude and refined products to markets facing shortages, but it also reduced the emergency cushion available for another crisis.

Inventories in advanced economies have fallen to their lowest levels in decades. Refiners in parts of Asia and Europe have struggled to secure suitable grades of crude, while tighter supplies of diesel, aviation fuel and petrol have raised transport and manufacturing costs.

Nasser warned that the refining system had little spare capacity to absorb additional interruptions. Damage to refineries, ports or shipping routes could quickly create shortages even when crude production remains available.

The conflict has also expanded risks beyond Hormuz. Iran-aligned Houthi forces have threatened Saudi energy installations and attacked shipping and port infrastructure around the Red Sea, placing greater pressure on the route that Aramco is using to bypass the strait.

Aramco said the attacks had caused limited financial or operational damage. The company has strengthened contingency planning around export terminals, pipelines and processing facilities while maintaining production capacity needed to respond when shipping conditions improve.