Saudi Aramco Says Hormuz Shipping Collapse Could Delay Recovery Until 2027

About 100 million barrels of oil are being lost from the market each week as tanker traffic through the Strait of Hormuz remains severely restricted, according to Saudi Aramco CEO Amin Nasser. He said only two to five vessels were crossing daily, compared with roughly 70 under normal conditions, and warned that the oil market might not normalize until 2027 if the disruption continued until mid-June.

The scale of that traffic collapse explains why reopening the strait would not produce an immediate return to normal. Tankers must be positioned, cargoes scheduled and refineries supplied with the grades they are configured to process. Nasser said the market would need months to rebalance even if the route reopened immediately.

Hormuz normally carries one-fifth of global oil supply, making it difficult to replace with pipelines or alternative ports. The disruption has already pushed energy prices higher and intensified concerns about inflation and an economic downturn. A Federal Reserve analysis of the 2022 oil shock illustrates the transmission mechanism: oil enters household energy spending directly and also raises production and transportation costs. Its model found the earlier price surge added almost one percentage point to annualized U.S. headline inflation upon impact, although effects on core inflation and output were smaller.

The western bypass preserves only part of Saudi exports

Aramco has increased crude movements through Saudi Arabia’s East-West pipeline to Yanbu on the Red Sea, avoiding Hormuz. Nasser called the route a “critical lifeline,” and said it is sustaining approximately 60% to 70% of Aramco’s crude export volumes.

That is substantial, but it does not make the two routes equivalent. Yanbu’s stated export capacity is 5 million barrels per day, while Hormuz serves multiple producing countries and normally handles an enormous share of worldwide supply. Separate Saudi western terminals are also exporting almost 900,000 barrels per day of refined products, but neither flow can fully compensate for the broader regional shortfall.

The bypass also imposes a product constraint. Yanbu is handling primarily Arab Light crude and some Arab Extra Light, while heavier grades have been curtailed. Crude grades differ in density and sulfur content, and refineries are designed around particular feedstock ranges. Preserving the headline volume of exports therefore would not necessarily preserve the mix of crude that individual refineries need.

Aramco’s production capability is not the same as its ability to deliver oil to customers. Nasser said the company could reach its maximum sustainable crude capacity of 12 million barrels per day in less than three weeks if required. Yet additional production has limited market value when the available export corridor cannot move all of it or cannot deliver the required grades to the right destinations.

Recovery requires more than reopening the channel

Nasser characterized the current reduction in consumption as “demand rationing” rather than permanent demand destruction. In that reading, buyers are deferring or reducing consumption because supply is constrained and prices are elevated. If normal shipping resumes, demand could rebound while inventories, tanker schedules and refinery feedstocks are still being restored, prolonging the imbalance.

There are signs that traffic can improve without approaching its previous level. Shipping data reported by Reuters on October 8 showed seven commodity vessels crossing on a Tuesday and 10 on Wednesday. Those counts remained far below normal commercial traffic. Vessel-tracking totals also vary because some ships do not transmit identification signals, so visible movements do not capture every physical transit.

Refining availability adds another layer to the recovery. Nasser said the SAMREF refinery was fully operational, SATORP was operating partially while restoration continued, and Ras Tanura had been restored, although some units were undergoing scheduled turnaround work. These facilities can process crude and support product exports, but their status cannot remove the shipping constraint at Hormuz.

The engineering limit is therefore not simply how much crude Aramco can produce. It is the throughput of the entire chain: pipelines, storage tanks, terminals, suitable tankers, crude-grade allocation and refinery demand. Saudi Arabia’s western route is keeping most of Aramco’s exports moving, but a bypass carrying 60% to 70% cannot erase a regional corridor losing an estimated 100 million barrels each week. That accumulated deficit is why Nasser sees a path to recovery that could extend into 2027.

By Thomas Caldwell — AMI’s senior editor for mechanical and mobility engineering, covering vehicle electronics, systems integration, electrification, chassis systems, propulsion, and safety policy.