The global oil market and wider economy will face "catastrophic consequences" if crude flows through the strait of Hormuz remain disrupted, Saudi Aramco chief executive Amin Nasser said today.
The war in the Middle East — triggered by joint US and Israeli strikes on Iran on 28 February — has brought traffic through the strait to a near halt, trapping cargoes loaded from ports inside the Mideast Gulf and cutting some of the world's biggest oil producers off from their main export route.
This disruption, combined with rapidly filling storage, has already forced several key Opec+ producers to curb output.
As of 9 March, Saudi Arabia, the UAE, Kuwait, Bahrain and Iraq had reduced their collective crude output by 6.2mn-6.9mn b/d, according to Argus calculations based on February production levels.
"The disruption has caused a severe chain reaction, not only in shipping and insurance, but there is also a drastic domino effect on aviation, agriculture, the automotive and other industries," Nasser said. "The longer this disruption goes on, the more drastic the consequences for the global economy."
Saudi Arabia has begun cutting production by shutting several offshore fields in response to security threats from Iranian missile and drone attacks on Mideast Gulf energy infrastructure, sources with knowledge of the matter told Argus.
Aramco has closed the Safaniya, Marjan, Zuluf and Abu Safa fields, the sources said, resulting in an estimated reduction of 2mn-2.5mn b/d.
Nasser did not confirm those figures or identify the fields. He said only that the company was using its 7mn b/d East-West pipeline to move crude to Yanbu on Saudi Arabia's Red Sea coast for export, providing an alternative outlet that avoids the strait of Hormuz.
"We are putting mainly Arab Light and some extra light to the western region. Certain areas where we have medium and heavy we are not utilising for the time being because we have adequate capacity to meet our requirements," Nasser said.
Safaniya produces Arab Heavy, while Zuluf, Marjan and Abu Safa produce Arab Medium.
Aramco is also using its storage capacity, both inside and outside the kingdom, to help supply customers. "We are meeting the majority of our customer requirements," Nasser said.
