dailynewsnblog
By Anushree Mukherjee
Aug 13 (Reuters) – As the U.S.-Iran war drags on with no end in sight, oil traders and policymakers are grappling with a critical question: are global oil stocks enough to offset what could become the biggest supply disruption on record?
The answer is far from clear, depending not only on how much oil remains in storage, but also on how much of it can actually be released.
DISRUPTION DOESN’T GET ANY EASIER
How long reserves would last can only be ascertained by figuring out the size of the current disruption.
The head of Saudi Aramco believes the world has lost 2.6 billion barrels of oil since the start of the war, making it the largest supply disruption ever in cumulative terms apart from the 1979 Iranian revolution, according to Reuters calculations.
That amounts to a massive 25 days of global consumption based on pre-war global oil demand of 103 million barrels per day.
However, China cut demand in recent months and that means the world is consuming less oil.
Most analysts believe the daily supply gap to cover demand amounts to 5 million bpd even though Aramco says the world is losing 11 million barrels of supply from the Gulf daily. The gap might have widened in July after Ukrainian drones shut the Kazakh CPC pipeline, pumping 1.8 million bpd.
EMPTY AFTER 180 DAYS
The West’s energy watchdog, the International Energy Agency, in March announced a release of 400 million barrels from emergency reserves and says the global economy still has substantial stocks.
The IEA was created in 1974 in response to another major oil crisis — the Arab oil embargo.
IEA stocks consist of government-held stocks and commercial stocks — together standing at 1.5 billion barrels and enough to cover the current estimated supply gap of 5 million bpd for 300 days.
However, the IEA cannot order the release of commercial stocks, such as those held by refiners for operational reasons.
That leaves only 0.9 billion in government-held stocks — enough to cover the supply gap for 180 days.
The IEA said it is ready to release more if the crisis worsens.
AS EMPTY AS DURING REAGAN’S PRESIDENCY
The IEA does not disclose the precise make-up of stocks.
Of its remaining government-held stocks, one-third is held in the United States.
Crude oil stocks in the U.S. Strategic Petroleum Reserve fell to the lowest levels since January 1983, when Ronald Reagan was president.
The U.S. Government Accountability Office warned in May that SPR’s infrastructure was deteriorating fast and that a quarter of reserves is no longer available.
