Hormuz shock drains nearly 1bn oil barrels

Global oil inventories have fallen by nearly 1 billion barrels since shipping through the Strait of Hormuz was disrupted by the US-Israeli war on Iran. Sultan Al Jaber said the disruption has drained fuel reserves and eroded the supply buffers that previously helped stabilize energy markets.

He described a world in which emergency stockpiles have been heavily tapped to offset reduced flows through the key maritime chokepoint. The drawdown has occurred as producers and consumers try to keep supplies moving despite severe constraints on one of the most important oil transit routes.

Alongside the inventory decline, transportation and logistics costs have surged to more than 30% of the cost of a barrel. Before the current disruption, those costs accounted for less than 5% of the barrel price, highlighting how sharply shipping economics have deteriorated.

Al Jaber said the Iran war severely disrupted energy flows through the Strait of Hormuz and exposed weaknesses in global supply chains. He stressed that energy security is now measured not only at the point of production but also at the point of delivery to end consumers.

He argued that guaranteeing production is no longer sufficient, as bottlenecks and higher freight costs can still prevent energy from reaching markets. The spike in logistics costs underscores how vulnerable existing routes and infrastructure are to regional conflict and operational shocks.

The disruption has had knock-on effects in specific fuel segments. In some countries, diesel inventories have fallen to their lowest levels for the respective season in 35 years, indicating tightness in middle distillate supplies.

In other markets, there is a supply shortfall of 600 billion cubic feet of liquefied natural gas. These conditions point to an increasingly stressed global fuel system in which both oil and gas markets are contending with constrained logistics and depleted stocks.

Speaking at the opening of ADIPEC in Abu Dhabi on November 2, Al Jaber called for a fundamental overhaul of energy security. He said the world needs greater strategic storage, stronger infrastructure and diversified routes to market to withstand future disruptions.

He outlined five priorities for strengthening energy security: accessible supply, routes to market, operational intelligence, investment confidence and people. He also advocated expanding strategic reserves and improving infrastructure to reduce vulnerabilities exposed by the Hormuz disruption.

Al Jaber emphasized that intelligent energy systems capable of anticipating risks, improving performance and reducing costs will be essential. He said capital follows confidence, and that policy, finance and insurance must work together to keep trade moving and support investment in resilient supply chains.

To support these goals, ADNOC announced an agreement with OpenAI and G42 to become the first energy company to deploy OpenAI Frontier. The company plans to use the technology to transform field development, well management and commercial operations.

Al Jaber said the partnership, guided by Abu Dhabi’s leadership, aims to make ADNOC’s systems smarter, safer, more secure, more resilient and more productive. He added that ADNOC’s resilience playbook was developed years before the current disruption, positioning it to manage the present crisis.