Crude stocks have been burned through as the energy crunch spreads to global shipping, Russell Hardy has said
Western countries have exhausted the oil inventories available to offset supply disruptions from the US-Israeli war with Iran, leaving the market increasingly exposed to further shocks, Vitol CEO Russell Hardy has said. The energy crunch has now spread from crude and refined fuels to global shipping.
Speaking at the Energy Intelligence Forum in London on Tuesday, the head of the world’s largest independent oil trader said the market had burned through much of the stock that previously helped absorb disruptions. “There aren’t any more inventories to drain in the West,” Hardy said.
Around 12 million barrels per day of crude and another 2 million barrels of refined products have left the Middle East on tankers over the past seven to ten days, according to Hardy. “Without it, you do have that $200 per barrel scenario, so it’s pretty important that it continues,” he said.
The disruption has changed shape as the conflict has dragged on, Hardy said. What began as a crude oil crisis then became a refined-products crunch and has now developed into a shipping crisis as traders struggle with tanker availability and soaring freight costs, he added.
“We’ve had pretty parabolic pricing on shipping,” Hardy said, adding that uncertainty has become so extreme that traders cannot estimate freight expenses more precisely than within $2 to $4 per barrel. He also warned that refined-fuel shortages are likely to persist through winter because global refining capacity remains tight.
The warning comes as G7 countries agreed last week to release 100 million barrels of crude and refined products from emergency stocks, beginning with diesel, after US President Donald Trump’s administration piled pressure on Europe to do more to curb soaring diesel prices. Hardy said the details of the plan were “not fully transparent,” including how much crude and diesel would be released and where it would come from.
The move follows months of heavy stock drawdowns used to offset supply disruptions since the Iran war began in late February. The International Energy Agency said around 325 million barrels had already been released by early October from a 400-million-barrel emergency action announced in March.
Oil remains in Western storage, but much of what is left is either held in strategic reserves, needed to keep infrastructure operating, or cannot be readily brought to market, leaving less immediately available supply to absorb another disruption.
Crude flows from the Middle East have recovered significantly, but shipments of refined fuels have lagged behind. Tankers are also spending longer completing voyages as disruption around the Strait of Hormuz complicates normal shipping, reducing vessel availability even as more crude returns to the market.
Saudi Aramco CEO Amin Nasser warned on Monday that less than 10% of the roughly 6 billion barrels remaining in global commercial oil inventories is practically available to the market. He said rebuilding depleted stocks could take as long as two years even after flows through the Strait of Hormuz return to normal.
