Saudi Arabia's Aramco , the world's top oil exporter, said on Tuesday there would be "catastrophic consequences" for the world's oil markets if the Iran war continues to disrupt shipping in the Strait of Hormuz.
Oil shipments have been largely blocked from using the shipping artery, where normally roughly 20% of the world's oil would pass through daily. Iran's Revolutionary Guards said on Tuesday they would not allow "one liter of oil" to be shipped from the Middle East if US and Israeli attacks continue.
"There would be catastrophic consequences for the world's oil markets and the longer the disruption goes on ... the more drastic the consequences for the global economy," Aramco CEO Amin Nasser told reporters on an earnings call.
"While we have faced disruptions in the past, this one by far is the biggest crisis the region's oil and gas industry has faced."
WIDE RANGE OF SECTORS MAY BE HIT
The crisis has not only upended the shipping and insurance sectors, but it also promises to have drastic domino effects on aviation, agriculture, automotive and other industries, he added.
Global crude benchmark Brent, which rocketed to a more than three-year high of nearly $120 a barrel on Monday, was trading around $92 on Tuesday following comments by US President Donald Trump predicting the war could end soon.
Trump, however, warned that the US would hit Iran much harder if it blocked exports from the vital energy-producing region.
He has also said the US Navy could escort ships in the Gulf to guarantee safe passage. But the Navy's capacity to do that is unclear, with some vessels already engaged in strikes against Iran and shooting down its missiles.
Asked about US Navy escorts and whether they were possible on the scale required, Nasser said there are sizable volumes involved, adding that Aramco's customers assume the risk of delivery.
"Of course, we would support any actions or measures that would help to deliver our products to our customers, to the global market," he said.
NO EXPORTS FROM THE GULF
Nasser noted global inventories of oil were at a five-year low and said the crisis will lead to drawdowns at a faster rate, adding that it was critical that shipping in the strait resumed.
"Unfortunately, for global markets, most of the spare capacity is in this region," Nasser told analysts on a call, noting that incremental demand throughout the year will keep the market tightly balanced.
At present, Aramco is not exporting oil from the Gulf as ships cannot load cargoes there. But the company, which does not disclose its exact crude output, is meeting the majority of its customers' needs, he said, partly by tapping into global inventories.
"Now, that cannot be used - that inventory - for an extended period of time, but for the time being, we are capitalizing on it," he said.
The East-West pipeline is, meanwhile, being used to transport mostly Arab Light and some Arab Extra Light crude grades to the Red Sea port of Yanbu. The pipeline, which has more than doubled its initial capacity, is expected to reach its full capacity of 7 million barrels per day in the next couple of days as customers re-route, Nasser said.
"Even with our ability to export through the western region, you're talking about close to 350 million barrels of disruptions that will come off the market," he said.
In addition to the pipeline, Aramco is also able to direct crude towards domestic demand, he noted. Close to 2 million bpd of the pipeline's 7 million bpd capacity is going to western domestic refineries, which are net exporters of products, Nasser added.
A small fire from an attack last week on Aramco's Ras Tanura refinery, its largest domestically, was quickly extinguished and brought under control, Nasser said, adding that the refinery was in the process of being restarted.
