Saudi Aramco warned of 'disaster' for markets due to oil supply blockade

Saudi Aramco, the Saudi oil company, has warned of "catastrophic consequences" for the hydrocarbon market and the global economy as a whole in the event of a further halt in shipping through the Strait of Hormuz. The largest oil exporter claims that the logistics crisis has not only severely hit maritime transportation and insurance, but also threatens to trigger a large-scale chain reaction in many other industries.

"There will be catastrophic consequences for global oil markets, and the longer the disruptions last ... the more drastic they will be for the global economy," Reuters quoted Saudi Aramco chief Amin Nasser as saying at a confab on the company's financial results. "While outages have happened before, this crisis is by far the biggest the region's oil and gas industry has ever faced," Nasser said.

The head of Saudi Aramco noted that global oil reserves are at a five-year low. The Iranian crisis has already destabilized the shipping and insurance sectors - now the domino effect threatens aviation, agriculture, automotive and other industries, he warned.

On March 10, the Saudi oil monopoly reported a 12% drop in annual profits, mainly due to lower oil prices. The war in Iran is negatively affecting Saudi Aramco's current operations: the company has to cut production, and an Iranian drone attack led to the shutdown of its largest refinery last week. To support investor sentiment, Aramco announced its first-ever share buyback of up to $3 billion and raised its dividend, Bloomberg reports.

Four major players in the Middle East region - Saudi Arabia, Iraq, the United Arab Emirates and Kuwait - have reduced their total oil production by 6.7 million barrels per day, Bloomberg reported on March 10, citing sources. "In fact, this means that they have reduced their combined production by a third," the agency stated.

According to Bloomberg, Saudi Arabia reduced oil production by 2-2.5 million barrels per day, the UAE - by 500-800 thousand barrels, Kuwait - by about 500 thousand barrels, and Iraq - by almost 2.9 million barrels per day. In relative terms, Iraq was forced to make the most drastic reduction - by almost 60%. The decrease in oil production in Saudi Arabia, UAE and Kuwait amounted to 20% to 25% compared to February figures, the agency calculated.

On March 10, Saudi Aramco shares in Riyadh traded in the minus by a little more than 1%. At the same time, since the beginning of the war in Iran in late February, they have risen in price by 7%. The consensus rating, compiled by MarketScreener based on the estimates of 18 analysts, is "above market" (Outperform, buy recommendation). The average target price of 28.3 Saudi riyal ($7.54) per paper, calculated by the site, assumes a 4.4% growth in quotations over the next 12 months.

This article was AI-translated and verified by a human editor