Executives warn the real shock hasn't hit yet
The global oil market has already lost roughly 600m barrels of supply since Iran shut down the Strait of Hormuz in late February, and every day that passes deepens a hole that will take months to fill.
Shell CEO Wael Sawan told investors Thursday the market faces a shortage of close to 1bn barrels, “either because of locked in barrels or unproduced barrels,” CNBC reported.
Halliburton CEO Jeffrey Miller said on his company's April 21 earnings call that “recovery of oil and gas production and inventories will not be a quick or simple process.”
Rystad Energy chief economist Claudio Galimberti told Reuters the world will have lost between 1.2bn and 2.0bn barrels by the time supply normalises — between 16 and 27 percent of pre-war global inventories.
Global gas has taken a parallel hit, with the closure of Qatar's LNG production costing between 30m and 50m tonnes, or 7 to 11 percent of annual global supply, Galimberti said.
Goldman Sachs, as cited by Reuters, warned this week that global inventories are expected to drop to around 98 days of demand by end of May, down from 105 days at the end of February, with refined product buffers “approaching very low levels fast.”
Morgan Stanley predicted US gasoline inventories will fall to around 198m barrels by late summer — the lowest for that time of year in modern records.
Oil prices fell more than 10 percent since Tuesday on renewed hopes of a US-Iran deal, with Brent crude dropping 7.8 percent Wednesday to US$101.27 a barrel. But executives cautioned against reading that as imminent relief.
Exxon Mobil CEO Darren Woods said it will likely take up to two months for oil flows to normalise once the Strait reopens — with the waterway needing to be swept for mines and hundreds of ships stuck in the Persian Gulf redeployed.
Equinor CEO Anders Opedal told analysts Wednesday that even with a peace deal, full market recovery would take at least six months.
ConocoPhillips CFO Andrew O'Brien warned investors April 30 that import-dependent countries could “potentially start to face critical shortages as we get into the June-July time frame.”
TotalEnergies CEO Patrick Pouyanne warned last week that at least 500m barrels have already been drawn from global stockpiles, saying inventories would remain “very low” even if the conflict ends in May.
A Reuters poll of analysts last week pegged Brent futures to average US$86.38 a barrel this year, up from around US$62 in January.
“The most important resource, or card, that Canada has today is trust,” IEA executive director Fatih Birol told a Toronto policy conference this week, Bloomberg reported, warning that “the cost of missing this train will be incredible.”
He used back-to-back appearances in Ottawa and Toronto to press Canada to move faster, saying buyers now price in an “energy security risk premium.”
Bank of Canada governor Tiff Macklem told a Senate committee Wednesday that international capital is flowing to countries with faster regulatory regimes.
Macklem said streamlining and speeding up approvals could “unleash greater Canadian access to global capital.”
That friction showed this week when five of Canada's largest oil sands producers criticised both the federal and Alberta governments for slow progress on last year's energy memorandum of understanding, blaming “complex regulatory processes and uncompetitive carbon frameworks,” BNN Bloomberg reported.
Federal energy minister Tim Hodgson's office said the Pathways carbon capture project would generate approximately $16.5bn in GDP and between 18,500 and 43,000 jobs annually.
Hodgson told his Ottawa audience that European countries are now prepared to pay more “for that security of supply” to receive Canadian LNG, and flagged “a whole bunch of new FID announcements in the next coming weeks.”
Reuters reported that the Strait closure is choking fuel import-dependent economies across ASEAN's 11 nations and nearly 700m people, making it among the hardest-hit regions.
In Asia broadly, crude imports fell 30 percent in April from a year earlier to the lowest since 2015, according to Kpler cited by the same article.
Australia, which imports roughly 80 percent of its fuel, announced plans Wednesday to spend US$7.22bn building fuel reserves.
Birol called it this the “largest energy crisis in history” and warned Ottawa the fallout would soon hit home: “It will be your daily issue soon.”
