LONDON (Oct 5): Shipping bottlenecks, deep cuts in refinery output and inventory draws that could take years to replace will keep global oil prices high beyond this year, industry executives said at a conference in London on Monday.
Following the start of the US-Israeli war on Iran at the end of February, Iran effectively closed the Strait of Hormuz, choking exports through one of the world's most crucial shipping bottlenecks.
The impact has been compounded by attacks on oil and gas infrastructure, hampering production and adding to the disruption of exports of crude oil and refined fuels.
"I think it is going to be bedlam for the bulk of the end of the year and maybe 2027," Petroliam Nasional Bhd (PETRONAS) president and group chief executive officer Tan Sri Tengku Muhammad Taufik said.
In his first conference address since the start of the Iran war, Amin Nasser, the chief executive of Saudi Aramco, the world's biggest oil company, told the Energy Intelligence Forum in London it could take up to two years to refill global stockpiles drawn on as an emergency measure.
"Until Hormuz fully reopens and confidence returns, the crude reality is that pressure at both ends of the barrel will intensify. Even then, replenishing inventories while meeting demand could take up to two years," he said. Both ends of the barrel refer to unrefined crude and refined products, such as diesel and jet fuel.
He added that three billion barrels have been lost since the start of the conflict, and one billion barrels have been withdrawn from global inventories.
Six million barrels per day of fuel is missing
Kuwait Petroleum Corporation CEO Shaikh Nawaf Al-Sabah said the focus is on moving more refined fuels to global markets and restoring Middle Eastern refineries to full production as the impact of the Iran war has left the world with a shortfall of six million barrels per day (bpd) of refined products.
"There is not enough refining capacity in world to make up for shuttered capacity in the Middle East's Gulf," Shaikh Nawaf said.
Kuwait's crude oil exports have held up at around one million bpd this year despite the war-related disruptions, even as production has fallen from around 2.6 million bpd to two million bpd, Al-Sabah told the conference.
Demand recovery beyond next year
ConocoPhillips executive chair Ryan Lance said it could be 2028 or 2029 before global oil demand recovers from dipping this year due to the current crisis, but added it would grow after that.
The oil price floor for US benchmark West Texas Intermediate (WTI) crude will rise to around US$70 (RM286) per barrel, Lance said, with a mid-cycle price of US$65 to US$70 per barrel.
Should prices remain strong, US oil production could exceed 14 million to 14.5 million barrels per day, he said. He did not specify what he meant by strong.
Brent crude futures traded just above US$100 per barrel on Monday, while WTI was close to US$90 per barrel.
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