Vitol CEO says West has exhausted its oil inventories

The heads of the world's largest oil exporter and its largest independent oil trader used back-to-back appearances in London this week to make the same warning: after more than seven months of war with Iran, the world has run through most of its spare oil. Saudi Aramco Chief Executive Amin Nasser said on Monday that the global "supply resilience cushion is scarily thin." On Tuesday, Vitol Group CEO Russell Hardy said Western inventories have been exhausted and that fuel markets are likely to stay tight into winter.bloomberg+1

Both men spoke at the Energy Intelligence Forum in London. Their remarks came days after G7 nations, working with the International Energy Agency, agreed to release 100 million barrels of diesel and crude oil to bring down fuel prices.freemalaysiatoday

"Last major tool in the box"

Nasser said the world went into the crisis with almost 10 billion barrels of oil in storage and that less than 6 billion barrels of commercial inventories are left. He added that less than 10% of what remains is actually usable because of technical limits. Much of what countries report as reserves is the minimum volume needed to keep infrastructure running, he said. "That's why you find they're struggling with 100 million barrels," he added.ttnews+2

"Until Hormuz fully re-opens and confidence returns, the crude reality is that pressure at both ends of the barrel will intensify," Nasser said. He noted that refined fuel prices have risen faster than crude. "Emergency reserves might buy us a winter. They cannot fix long-term supply," he said. According to the Telegraph, he called onshore commercial stocks the "last major tool in the box".freemalaysiatoday+3

Nasser said that even after the Strait of Hormuz reopens, rebuilding inventories could take up to two years. Restocking would add at least 2 million barrels a day to demand. He said Aramco's upstream capacity is undamaged. The company is looking at alternative export routes and studying plans to double or triple its storage capacity.ft+1

"We drained the available inventory"

Hardy was even more direct. "There aren't any more inventories to drain in the West," he told the forum on Tuesday, according to Bloomberg. "We drained the available inventory".bloomberg

His warning comes as heating demand begins to rise. Argus reported that stocks of ultra-low sulphur distillate in the New York region fell to 8.9 million barrels in the week to Sept. 25. That is the lowest level in more than four years and more than 37% below a year earlier.argusmedia

A warning months in the making

Hardy had predicted the shortage in April. At the FT Commodities Global Summit in Lausanne, he estimated that about 12 million barrels a day of supply had been lost since the war began on Feb. 28. He said cumulative production losses would reach about 1 billion barrels even if Hormuz reopened soon. "We've borrowed supply," he said at the time.subscriber.politicopro+1

Some supply has come back since then. Kpler data shows Middle East oil exports, not counting Iran, rose above pre-war levels last week despite attacks on ships in the strait. Both executives said that recovery has not been enough to rebuild the stocks the war has used up.freemalaysiatoday