World’s Running Out Of Cushion To Blunt Iran War’s Oil Shock, Top Execs Say

The global oil market is burning through its remaining supply cushion as wars in the Middle East and Ukraine drain inventories and leave energy prices increasingly vulnerable.

Less than 6 billion barrels remain in commercial inventories worldwide, but only a fraction of those supplies are readily available to the market, Saudi Aramco CEO Amin Nasser said Tuesday at the Energy Intelligence Forum in London, noting that the “system is already straining.”

Governments and energy companies have tapped stored supplies as conflict disrupted global oil flows and sent fuel prices higher. More than 1 billion barrels have been released since the Iran war began this year, Nasser said.

Saudi Arabia itself faced a potentially severe supply crunch in September after an attack knocked out its East-West Pipeline, a major route used to bypass the Strait of Hormuz. The kingdom restarted the pipeline at reduced rates roughly a week later, and flows have since climbed to 5.8 million barrels per day as the country works to maintain exports despite continued disruptions in the strait. 

The International Energy Agency (IEA) is now preparing another 100 million-barrel release of crude oil and diesel in an effort to ease pressure on fuel markets, Reuters reported. The move follows a record 400 million-barrel emergency release coordinated earlier this year, more than 80% of which has already reached the market.

“It took a lot of negotiations, but it is 100 million,” Nasser said. “Inventories are reaching a stress level. Only 10% or less is available, that’s why they struggle with 100 million barrels.”

Disruptions to oil and refined-fuel supplies from the Iran war have helped push fuel costs sharply higher, adding pressure to already strained global energy markets. U.S. diesel prices surged past $6 per gallon in September, providing the backdrop for the latest emergency release.

Diesel prices have eased from their September peak but remain historically elevated. The national average stood at $6.32 per gallon Tuesday, down from a record $6.53 on Sept. 22 but nearly $2.64 higher than a year ago, AAA data show. The sustained price pressure has prompted the Trump administration to open tax-free dyed diesel to highway trucks as officials seek to lower transportation costs amid the global fuel crunch.

The world consumes roughly 102 million barrels of oil per day, according to the IEA, meaning the planned emergency release is roughly equivalent to a single day of global consumption.