The CEO of the world’s largest oil company warned on Monday that if the disruption in the Strait of Hormuz persists beyond mid-June, it could take until 2027 for oil markets to normalize.
“Even if the Strait of Hormuz opens today, it will still take several months for markets to regain balance. If the opening is delayed for a few more weeks, normalization could last until 2027,” Saudi Aramco CEO Amin Nasser told investors during the company’s first-quarter results conference.
The United States and Iran do not appear to be any closer to an agreement to end the war and reopen Hormuz. President Donald Trump on Monday said a ceasefire with Tehran was on life support after rejecting a counter-offer to end the conflict.
Before the war, about 20% of the world’s oil supply passed through Hormuz. Since early March, Iran has essentially managed to shut down the narrow sea lanes connecting the Persian Gulf to global markets.
The biggest challenge facing the market is disruption to the global tanker fleet, Nasser said. He said more than 600 ships, mainly oil tankers and product tankers, are currently stranded in the Gulf.
About 240 ships are waiting on the outskirts of Hormuz, the CEO said. Nasser said some of these ships may leave for other locations because they have been anchored in the area for too long.
The CEO said the fleet was “mixed up” with several tankers deployed in the wrong location. He said ships would need to be redeployed from certain regions of the world to normalize supply chains.
“Even in the most optimistic scenario, it will take several months for energy and commodity supply chains to return to pre-conflict navigation as ships reroute or avoid being idled,” Nasser said.
The CEO said Hormuz Island remained closed and the oil market would lose 100 million barrels of supply each week. He said only two to five ships now pass through Hormuz every day, compared with 70 before the war.
Nasser said the market has already lost more than 1 billion barrels due to the Hormuz closure. He said the net loss was about 880 million barrels due to Saudi Arabia’s redirection of exports through the East-West pipeline and the release of strategic stockpiles by the government.
The East-West Pipeline would bypass Hormuz and transport crude oil from the Saudi Gulf to the Red Sea. Aramaco has increased its pipeline’s production capacity to 7 million barrels per day, Nasser said.
The CEO said oil inventories, particularly gasoline and jet fuel, were declining rapidly due to supply losses from the Middle East. “This trend could reach extremely low levels ahead of the summer driving and travel season,” Nasser said.
The CEO said the disruption to shipping through the strait had caused the biggest energy supply shock ever. The strain on global supplies is “increasing by the day,” he said.
