Kuwait Petroleum CEO Warns Red Sea Crisis May Trigger Global Tanker Shortage

The ongoing disruptions in the Red Sea have been causing the potential scarcity in the global tanker fleet as underscored by the CEO of Kuwait Petroleum Corporation in a conversation with CNBC.

“Houthi militants have been targeting commercial shipping in the Red Sea since November, backing Palestinians amidst Israel’s conflict in Gaza,” he stated.

This has resulted in numerous container shipping and tanker companies having to reroute their vessels around the Cape of Good Hope in southern Africa increasing time and expenses.

Expressing concern, Shaikh Nawaf Al-Sabah remarked during an interview at the CERAWeek by S&P Global energy conference, “One of the things I think we may be concerned about is if this continues for another six months, that we will not have perhaps the tanker fleet available to continue to go around.”

During the crisis, KPC has redirected a significant portion of its production around the Cape, as Al-Sabah noted, though he refrained from disclosing exact figures. He mentioned that on a day-to-day basis, the company has been continuously assessing the situation and determining the most viable shipping routes.

“We maintain a strategic tanker fleet for scenarios like these,” Al-Sabah emphasized. “We’re confident in our ability to meet customer demands promptly and without disruption, but I can’t speak to how many other producers have adopted a similar strategic approach.”

Kuwait Petroleum CEO Warns Red Sea Crisis May Trigger Global Tanker Shortage
Chevron CEO expresses concern over Middle East tensions and opts against moving ships to the Red Sea.

Al-Sabah remains optimistic regarding the potential for Middle East tensions to escalate into a conflict that could impede crude supplies across the broader region.

Reflecting on historical precedent, he noted that while the Persian Gulf has been embroiled in numerous conflicts, Kuwait’s ability to ship was only compromised during Saddam Hussein’s invasion in 1990.

“The CEO expressed confidence, saying, ‘I don’t see a supply fear. I am confident that the industry and the system is well equipped to handle potential supply crises that might happen.'”

In contrast, Chevron CEO Michael Wirth struck a more cautious tone, describing the security situation in the Middle East as “tenuous” and capable of swiftly changing. Wirth informed CNBC that Chevron has opted against redirecting ships to the Red Sea amidst ongoing tensions.

“Today the conflict in Israel and Gaza persists, with no resolution in sight, and the regional risks remain elevated,” Wirth conveyed to CNBC’s Brian Sullivan during CERAWeek.

US Production demanded by China

The surge in crude oil futures proves this year has been tempered by uncertainties surrounding China’s economic health and the vigor of U.S. crude production.

Concerns arose last year as fears of slowing demand in China coincided with record-high U.S. production levels, reaching 13.3 million barrels per day which exerted downward pressure on prices.

Kuwait Petroleum CEO Warns Red Sea Crisis May Trigger Global Tanker Shortage
China’s steady crude demand counters U.S. production growth slowdown predicts ConocoPhillips CEO at CERAWeek.

However, Al-Sabah remains unworried about crude demand in the world’s second-largest economy.

“I frequently visit our partners in China, and their consistent feedback has been that they are eager to receive additional supplies,” he remarked. “Demand in China has been steadily increasing and remains robust.”

Contrary to previous growth rates, ConocoPhillips CEO Ryan Lance anticipates a slowdown in U.S. crude production growth to vary from 300,000 or 400,000 barrels per day this year, compared to the remarkable 1 million barrels per day increase seen last year.

Lance predicts that the total U.S., at some point the production will eventually surpass 14 million barrels per day within this decade, after which it will stabilize.

In response to last year’s decline in crude prices, OPEC and its allies opted to reduce production by 2.2 million barrels per day, aiming to bolster market stability. These production cuts are set to persist through at least the second quarter of this year.

Al-Sabah remains steadfast in his belief that U.S. production poses no threat to KPC’s market share, given OPEC’s strategy of withholding barrels from the market.

KPC is actively planning to enhance its production capacity, aiming to increase it from its current value, of 3 million barrels per day to 4 million barrels per day by 2035.

“As we look ahead to the second half of this year, I see more potential for demand growth than downside risks,” Al-Sabah asserted. “Our focus will remain on supplying the market to ensure equilibrium and stability.”

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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