The need to replenish strategic oil reserves will spur demand growth over the next year and a half, said Saudi Aramco CEO Amin Nasser at a conference with analysts.
"Demand in the second half is expected to be about 2 million bpd higher than in the first half. Restoring commercial inventories and strategic reserves to pre-conflict levels will significantly increase oil demand through 2027 and likely beyond. To put it in perspective: if the Strait of Hormuz were to reopen today, it would take up to 18 months at production of 2.1 million bpd above demand to replenish depleted inventories," he said.
Nasser added that many governments are considering building additional strategic oil storage capacity:
"Everyone we are currently in talks with is considering building additional storage to cope with such disruptions in the long term. Energy security is becoming a priority. (...) We are negotiating to determine how long it will take to build these additional storage facilities and what capabilities we have to supply products for storage."
At the same time, the Saudi Aramco chief emphasized that the 2.1 million bpd of additional requirements over the next 18 months he mentioned relate solely to replenishing depleted inventories in existing storage facilities.
According to Nasser, due to the Strait of Hormuz crisis, the global market lost more than 2.6 billion barrels, but the East-West pipeline and the release of strategic oil reserves helped mitigate the supply shock, reducing net losses to approximately 1.8 billion barrels. On average, the market is short about 11 million bpd. Currently, cargo flows through the Strait of Hormuz are only a tenth of pre-conflict levels, and it will take months to fully restore traffic.