Oil futures fell below $100 per barrel Tuesday as Middle East exports recovered, but some of the industry’s largest companies say the physical market remains far tighter than the futures price suggests.
Vitol CEO Russell Hardy said approximately 12 million barrels per day of crude oil and another 2 million bpd of refined products had left the Middle East by tanker during the previous seven to 10 days. With Western inventories heavily depleted, Hardy said maintaining those flows is critical to keeping markets balanced heading into winter.
“Without it, you do have that $200 per barrel scenario, so it’s pretty important that it continues,” Hardy said at the Energy Intelligence Forum in London, according to Reuters.
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The warning came as Brent crude futures dropped $2.77, or 2.8%, to $97.55 per barrel Tuesday afternoon in London. WTI fell 2.4% to $87.28. The decline followed stronger Gulf exports and plans by G7 countries to release 100 million barrels of crude and diesel from emergency reserves.
Meanwhile, Chevron CEO Mike Wirth said Tuesday that landed physical oil in Asia is currently closer to $150 per barrel than the roughly $100 level indicated by Brent futures. He also said shrinking supply buffers have made the energy system more fragile as the Middle East conflict continues.
The recovery in regional exports is real. Vortexa data cited by Reuters showed Gulf flows excluding Iran averaged 19.2 million bpd in September, or more than 81% of the 23.6 million bpd recorded before the war. Crude and condensate shipments recovered to 91% of pre-war levels, while refined fuel exports remained at only 60%.
Hardy said European benchmark diesel futures were trading at a premium of roughly $70 per barrel to crude Tuesday and warned that product-market tightness could extend through winter.
Industry executives have also warned that rebuilding depleted inventories will take considerably longer than restoring exports. Saudi Aramco CEO Amin Nasser said Monday that roughly 1 billion barrels have been withdrawn from global inventories since the conflict began and that rebuilding stocks while meeting demand could take as long as two years.
For now, recovering Middle East shipments are pulling futures lower. Hardy’s warning is that the same flows driving that relief have also become a critical buffer against a much more severe price shock.
