Ongoing crisis aggravates biggest supply shock in history
The world is facing a significant oil supply shock due to the ongoing Middle East crisis. To replenish depleted inventories, the world would need 18 months at an average rate of 2.1 million barrels a day if the Strait of Hormuz were open today.
The crisis has already resulted in the loss of over 2.6 billion barrels of oil, with an average of 11 million barrels of liquids supply removed each day. However, Aramco’s east-west pipeline and global inventories have helped alleviate the supply shock, lowering the net loss to around 1.8 billion barrels.
The global refining system is heavily stretched, and any major unplanned or prolonged shutdown of refineries could put further pressure on the global energy supply system. The crisis has also affected countries in Asia, with the region’s crude oil imports reduced by around 6 million barrels a day at the peak of the crisis.
The current trade flows through the Strait of Hormuz are at a tenth of pre-conflict levels, and the world will continue to lose more than 100 million barrels for each week the strait is closed.