Sultan Al Jaber, CEO of the Abu Dhabi National Oil Company (ADNOC), addressed the current state of the oil market and the impacts of war on energy supply on Monday (November 1) at the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC). He stated that the withdrawal of approximately one billion barrels of oil from strategic global reserves has severely reduced the security margin and reliable storage for energy supply.
Causes of Storage Reductions
According to Sultan Al Jaber, this reduction is due to disruptions in maritime traffic through the Strait of Hormuz caused by the war between the United States and the Israeli regime against Iran. Another notable point is the decrease in diesel storage in some regions of the world to its lowest level in 35 years. Meanwhile, some areas are facing a shortage of 600 billion cubic feet in liquefied natural gas (LNG) supply.
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Economic Consequences
Diesel prices in many markets have reached their highest levels due to supply disruptions caused by the war. This price increase has significantly impacted government economies and consumers' living costs, posing a threat to inflation. Sultan Al Jaber emphasized the need to increase strategic oil and petroleum product storage to address these challenges and to bring refining capacity closer to market consumption levels.
He also highlighted the necessity of developing infrastructure before the need arises and stated that logistics must be utilized efficiently. The ADNOC CEO added that transportation and logistics costs have reached 30% of the price of each barrel of oil, whereas this figure was only 5% before the war began.
Changes in Crude Oil Prices
Currently, the price of Brent crude oil has reached about $110 per barrel, which is an increase of approximately 50% compared to February before the war began. This price increase has affected global markets and raised concerns about its impact on economic growth.
Last month, members of the International Energy Agency agreed to withdraw over 20 million barrels of diesel from strategic reserves to increase supply and curb runaway prices. Amin Nasser, CEO of Saudi Aramco, also announced last month that less than 6 billion barrels remain in commercial storage, most of which is practically inaccessible.
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