Saudi Aramco CEO Nasser: Middle East crisis continues to aggravate supply shock

Sagar Dua FXStreet

Saudi Aramco CEO Amin H. Nasser said during the European trading session on Tuesday that the ongoing geopolitical crisis continues to aggravate the biggest supply shock in history. Nasser added that the world would need 18 months at an average rate of 2.1 million barrels a day to replenish depleted inventories if the Strait of Hormuz, a critical chokepoint for almost 20% of global energy supply, were open today.

Additional remarks

An average of 11 million barrels of liquids supply removed each day in the face of resilient.

World has lost over 2.6 billion barrels of oil destined to a number of critical industries as a result of crisis.

Aramco's east-west pipeline and global inventories have helped to alleviate supply shock, lowering net loss to around 1.8 billion barrels.

There is a disconnect between futures and physical markets as evident from the strong refining margins that reflect refined product market tightness.

Global refining system is stretched heavily.

If refineries were to suffer any major unplanned or prolonged shutdown the global energy supply system could face more severe pressure.

Countries in Asia have already been affected, with the region's crude oil imports reduced by around 6 million barrels a day at the peak of the crisis.

Beyond refining, 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.

If strait were open today it would take up to 18 months at an average rate of 2.1 million barrels a day to replenish depleted inventories.

Continues to hope for a resolution that restores normal shipping and stabilizes the market but normalization will take time.

No material or impact on our capabilities even after the July attacks.

We will continue to capitalize on all export routes, Bab el Mandab, Suez canal, summed pipeline and Hormuz.

Market reaction

A slight positive move is seen in the WTI Oil price following remarks from Saudi Aramco CEO Nasser. At press time, the WTI Oil price trades 1% higher at around $79.50.

WTI Oil FAQs

What is WTI Oil?

WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.

What factors drive the price of WTI Oil?

Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.

How does inventory data impact the price of WTI Oil

The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.

How does OPEC influence the price of WTI Oil?

OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

GBP/USD ranges below 1.3450 amid US-Iran uncertainty, ahead of US data

GBP/USD keeps its range below 1.3450 in the European session on Tuesday. Uncertainty surrounding US-Iran talks drives traders toward a safe-haven currency such as the US Dollar, while undermining the risk-sensitive British Pound. All eyes remain on the US JOLTS data and Mideast headlines.

EUR/USD flatlines above 1.1500, awaits US jobs data

EUR/USD holds steady around 1.1505 in European trading hours on Tuesday. Markets remain cautious ahead of a slew of US jobs data, starting with the JOLTS Job Openings Survey later today. However, the downside appears capped by hot Eurozone inflation in July, bolstering the case for a European Central Bank rate hike at the next meeting.

Gold consolidates above $4,050 amid Fed hike bets and Iran uncertainty

Gold seesaws between tepid gains and minor losses during the Asian session as traders seem hesitant and opt to wait for further developments surrounding the Middle East crisis. The US Dollar struggles to build on the previous day's solid bounce from the lowest level since Mid-June and acts as a tailwind for the bullion. However, the uncertainty over US-Iran peace talks helps limit the downside for the buck.

Ripple and Stellar steady as derivatives data points to easing downside pressure

Ripple and Stellar show mixed price action, with XRP holding above the key $1 support zone while XLM faces rejection at $0.173. Meanwhile, improving derivatives metrics alongside fading bearish momentum suggest that the downside pressure may be easing for both altcoins. Derivatives data shows mild bullish sentiment among traders.

US JOLTs report in focus

In the US, the June JOLTs report will be in the spotlight. Job openings have increased modestly this year, which has historically predicted rising wage cost pressures ahead. June trade balance data will also be released in the afternoon and the preliminary reading pointed towards a stable trade deficit from May. The Fed's Schmid (non-voter, hawk) will be on the wires overnight.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.