Oil Supply Recovery Could Take a Year, Adnoc Executive Warns at London Conference

Oil supply chains could take up to a year to recover even after flows normalise and the Strait of Hormuz reopens, a senior executive from the Abu Dhabi National Oil Company has warned at the Middle East Petroleum and Gas Conference in London.

Philippe Khoury, executive vice president for sales and trading at Adnoc, said the recovery will not resume like a flip of a switch. The timeline is longer than previously indicated by Adnoc head Sultan Al Jaber, who said global oil flows would take four months to return to 80 percent of typical levels, with full capacity not expected until the first or second quarter of 2027.

For New York’s commodity markets, the extended recovery timeline adds a layer of complexity to an already volatile pricing environment. Brent crude fell more than 1 percent to $93.89 a barrel on Tuesday as peace talks between the US and Iran appeared to make progress, but both benchmarks rose more than 5 percent the previous session, underscoring the market’s sensitivity to geopolitical developments.

The International Energy Agency’s Toril Bosoni estimated the best-case scenario for reopening the Strait of Hormuz at eight months if an agreement were reached today. She also noted that demand destruction — where high prices force consumers to cut back on energy and travel — is already having an impact, with the biggest market adjustments coming from the demand side.

New York-based energy traders and hedge funds have been positioning for an extended period of elevated prices. Options markets show increased activity in contracts that would profit from a spike in crude above $120 per barrel, even as spot prices have retreated from earlier highs on hopes of a diplomatic resolution.

Khoury also warned that oil prices could reach a tipping point in August, when demand is traditionally high, if supply disruptions persist. For New York’s financial community, the combination of supply uncertainty and potential demand destruction creates a challenging environment for risk management and portfolio allocation.

Source: AGBI / Reuters | The New York