Oil prices could have hit $200 a barrel if not for East-West pipeline, Aramco chief says

Saudi Aramco's CEO, Amin Nasser, indicated on Monday at the Energy Intelligence conference in London that the absence of the East-West pipeline would have likely driven Brent crude prices to $200 per barrel. The Saudi firm is capable of deploying its full sustainable production capability of 12 million barrels per day within days, Nasser asserted.

The company possesses strategic reserves and the necessary flexibility to isolate or redirect output as necessary. Brent crude, which serves as the benchmark for two-thirds of the global oil trade, has been hovering around $100 a barrel over the past month despite an uptick in oil shipments through the Strait of Hormuz. Saudi Arabia has been a significant contributor to this surge, with Aramco ramping up crude shipments from its primary export terminal at Ras Tanura in recent months.

Following a temporary suspension of its main cross-country pipeline following an attack last month, the East-West pipeline has since resumed operations at approximately 80% capacity, thereby augmenting the oil that can be transported via the Red Sea. Nasser highlighted the resilience of Aramco's oil supplies in navigating the conflict through the strategic use of international storage and swift infrastructure repairs.

He did not address recent attacks on the kingdom during his presentation. Aramco is actively seeking alternate crude export routes and augmenting international storage facilities to mitigate its dependence on a single method of reaching global buyers. However, Aramco's oil reserves have become alarmingly depleted, which could leave markets vulnerable to further supply disruptions until the Strait of Hormuz is reopened, Nasser cautioned.

This warning came shortly after major economies announced plans to release up to 100 million barrels of emergency oil and diesel stocks to alleviate the escalating fuel costs. Nasser emphasized that as long as the Strait of Hormuz remains closed and confidence is not restored, the pressures at both ends of the oil barrel will exacerbate.

While the release of stockpiles may provide economies with some breathing room, it will not address the underlying imbalance between supply and demand. Even after the closure of the crucial shipping chokepoint at Hormuz is lifted, it could take up to two years for energy-consuming countries to replenish their reserves. Gulf producers are striving to scale up production and exports, having succeeded in boosting crude flows to near prewar levels. Nonetheless, oil markets continue to factor in security risks to supply in the Gulf and Red Sea.