2024-01-17 08:38:21
Global oil markets will face Red Sea disruptions in the near term, although prolonged Houthi attacks on ships would lead to tanker shortages due to longer voyages and delayed supplies, CEO says of the Saudi oil giant Aramco.
Amin Nasser told Archyde.com he expected the oil market to tighten after consumers reduced inventories by 400 million barrels over the past two years, leaving spare capacity to OPEC as the main source of additional supply to meet growing demand.
Houthi attacks on shipping in the Red Sea have forced many companies to divert their cargoes to Africa. The Houthis, aligned with Iran, say they are acting in solidarity with the Palestinians in Israel’s ongoing war against Gaza.
“If it’s short term, tankers might be available… But if it’s longer term, that might be a problem,” Nasser said in an interview on the sidelines of the World Economic Forum which is being held this week in the Swiss ski resort of Davos. “More tankers will be needed and will they have to travel a longer distance?
Container ships pause or turn away from the Red Sea that leads to the Suez Canal, the fastest route between Asia and Europe, through which about 12 percent of global shipping passes.
The alternative route around the Cape of Good Hope in South Africa extends the trip by 10 to 14 days.
Aramco can bypass the Bab al-Mandab Strait near Yemen, where the Houthis launch their attacks, with a pipeline linking its eastern oil facilities to its west coast and giving it quicker access to the Suez Canal , declared Mr. Nasser.
Some oil products may have to bypass Africa, added Nasser, who does not expect the Houthis to attack Aramco facilities again following Saudi-Yemen peace talks .
FILLING CAPACITY
Mr. Nasser said he forecast oil demand of 104 million barrels per day (bpd) in 2024, a growth of about 1.5 million bpd after an increase of 2.6 million bpd in 2023 .
Growing demand, combined with low inventory, will help tighten the market further, he added.
Nasser said global stocks fell to the lowest level in a five-year average, after consumers depleted offshore and domestic reserves by 400 million barrels over the past two years.
“The only card available today is reserve capacity, which is around 3.5% globally. As demand increases, this reserve capacity will erode unless there is has an additional offer.
Mr. Nasser said he could not predict when oil demand would peak or plateau, given that fossil fuel consumption is shifting from developed to developing countries, which are getting richer.
“Growth is good and demand is very healthy in China,” he said.
Aramco has invested in Chinese refineries in crude supply deals and is in talks for others, with a focus on turning liquids into chemicals.
“There are not many fully integrated refineries in the world. China offers this opportunity and the demand for chemicals is expected to increase, so it is an attractive market,” Mr Nasser said. (Writing: Yousef Saba; Editing: Alexander Smith)
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