Oil stockpiles call: Adnoc chief says buffers have eroded

Abu Dhabi’s state oil chief says the world needs larger oil stockpiles to absorb shocks, since the US-Iran war exposed weak spots in energy security.

Sultan Al Jaber, who runs Adnoc, spoke on Monday as ADIPEC opened, where he stressed oil stockpiles. The Abu Dhabi energy conference lasts from November 2 to 5.

Why oil stockpiles matter now

About 1 billion barrels have left global inventories since disruption in the Strait of Hormuz at the war’s start, Al Jaber said. “Simply put, the world has eroded its supply buffers,” he added.

In some markets, diesel stocks have fallen to a 35-year seasonal low. Other regions face a liquefied natural gas shortfall of 600 billion cubic feet.

The International Energy Agency counted 8.2 billion barrels of visible oil inventories worldwide before the war. That figure covers government reserves, commercial stocks and oil held on tankers.

What Al Jaber wants on oil stockpiles

He called for expanded strategic storage, larger stockpiles of products and flexible refining capacity closer to consumer markets. He also said builders must put up infrastructure before anyone needs it.

Al Jaber made the remarks in the opening address of the conference. Governments should also create policies that encourage investment, he added, and financial institutions and insurers should play a bigger part.

Costs and prices

Moving oil by ship and truck now takes over 30 percent of a barrel’s cost, versus under 5 percent before the war. That shows how much the conflict has raised the price of moving oil.

Brent crude changes hands near $110 a barrel, roughly 50 percent above its level just before the war. Diesel prices have reached record highs in many markets, which adds to inflation and living-cost pressure.

Emergency releases so far

In March, members of the International Energy Agency agreed a record emergency release of 400 million barrels. About 330 million barrels had come out of reserves by mid-October.

A month ago, the agency also agreed to move over 20 million barrels of diesel into the market, with leftovers from the record pledge, to lift supply and cool prices.

Last month, Aramco chief executive Amin Nasser said commercial inventories had slipped below 6 billion barrels. Most of that oil is not practically available, he added.

War risk and diplomacy

The war started on February 28 after US and Israeli attacks on Iran, whose forces then hit targets across the Gulf. Curbs on shipping through Hormuz, once the route for about a fifth of daily global oil, have disrupted exports.

Producers have had to find other routes to market. Al Jaber said the UAE prefers diplomacy to end the war.

His remarks echoed comments from presidential adviser Anwar Gargash on Sunday at a security forum in Bahrain. Gargash urged a political solution. He said the UAE is “braced for the worst” because many expect fighting to restart after the US midterm vote.

For now, the call for larger oil stockpiles puts storage and refining capacity at the centre of the energy debate. Bigger oil stockpiles, he argued, would give markets a cushion.