Aramco Profit Jumps 44% as Oil Prices Rise Amid Hormuz Disruption
Saudi oil major Aramco reported a 44% increase in second-quarter net profit on Tuesday as it benefited from elevated prices for crude oil, refined products, and chemicals while redirecting shipments away from the conflict-affected Strait of Hormuz. However, it cautioned that global oil inventories continue to be diminished as a result of interruptions to crude flows stemming from the U.S.-Israeli conflict with Iran, which have ranked among the most significant disruptions in the history of energy markets. Aramco, the leading oil exporter globally, reported a net profit of $32.69 billion for the quarter ending June 30, an increase from $22.67 billion during the same period last year. “Despite the unprecedented supply disruption through the Strait of Hormuz, we continued to demonstrate our ability to maintain business continuity by capitalizing on our diverse asset base and multi-decade planning,” CEO Amin Nasser said. He stated that Aramco’s storage capacity, its export terminals, and its capability to increase exports via the East-West Pipeline to the Red Sea port of Yanbu – a route he has previously characterised as a vital lifeline – were essential to this.
The disruption incurred substantial expenses for global supply chains. Nasser stated that the global economy has experienced a loss exceeding 2.6 billion barrels of oil intended for various sectors, including agriculture, semiconductors, automotive, chemicals, and manufacturing. He stated that releases from strategic reserves and commercial inventories, in conjunction with demand rationing and the East-West Pipeline, had contributed to mitigating the impact. Even if the Strait of Hormuz were to reopen immediately, it would require up to 18 months, at an average rate of 2.1 million barrels per day, to restore depleted inventories, he noted. Nasser indicated that the disruption had revealed weaknesses in the global refining system, with robust refining margins suggesting ongoing tightness in product markets as refineries around the world functioned at near-maximum utilisation rates. He cautioned that the industry possesses limited buffers to withstand additional disruptions, and that any significant unplanned or extended refinery outage could exacerbate pressures on global energy supplies.
The supply disruption could widen after Iran-aligned Houthi forces announced a blockade of Saudi Arabia’s oil industry last month, adding pressure to the market Red Sea shipping and the expanding repercussions of the conflict. The blockade poses a significant risk to the East-West Pipeline route as well as to Saudi export terminals located on the Red Sea. Nasser stated that recent attacks on facilities had led to certain production interruptions; however, he expressed confidence that Aramco would be able to restore operations promptly. Yemen’s Houthi militants launched attacks on Saudi oil facilities at two Red Sea ports last month, marking an escalation in the Gulf conflict as it opened a second front.
In response to enquiries regarding the speed at which production could be increased following the resolution of disruptions, Nasser indicated that output could revert to pre-conflict levels within a matter of days and achieve Aramco’s maximum sustained capacity of 12 million barrels per day within three weeks, should there be a demand for it. The company’s total hydrocarbon production averaged 9.5 million barrels per day in the second quarter, compared to 12.8 million in the same period a year earlier, the company stated. Looking to the rest of the year and beyond, “we remain concerned that the continued disruption via the Strait of Hormuz and the threat to shipping through the Bab el-Mandeb Strait could have a significant long-term impact on the world economy,” Nasser said on a call with analysts following the results.
