Al Jaber wants bigger oil reserves, and Gulf producers are already building them in Asia

Adnoc CEO Sultan Al Jaber says the world needs to hold more oil in reserve, and Gulf producers are already building those reserves in the countries that buy their crude. Speaking at the opening of the ADIPEC energy conference in Abu Dhabi, Al Jaber called for bigger strategic oil reserves, more refining capacity closer to consumers, and new transport routes to cope with disruptions like the one in Hormuz, Bloomberg reports. Aramco and Adnoc are lining up storage agreements across Asia, and in a shortage the host countries get first call on the barrels.

Why it matters: The world’s spare barrels are running low. Nearly 1 bn barrels have come out of global oil inventories over eight months of war, diesel stocks in some markets are at their lowest seasonal levels in 35 years, and LNG supplies have been disrupted, Al Jaber said on Monday. “Simply put, the world has eroded its supply buffers,” he said. Shipping and logistics now make up more than 30% of the cost of a barrel, up from less than 5% before the war, he added.

The World Bank sees the drawdown continuing. Its latest Commodity Markets Outlook sees global oil supply dropping 5.2% this year, the largest drop in more than four decades outside the 2020 recession. It expects consumption to fall 2.5% on high prices and electrification, particularly in China. With production still below consumption, stocks keep falling, and the market is more exposed to fresh disruption. The Bank sees Brent averaging USD 91 a barrel this year, up from USD 69 in 2025, and USD 105 in 2027 if the conflict escalates.

Of Al Jaber’s fixes, storage is the cheapest: Expanding strategic storage is a relatively inexpensive way to strengthen supply chains, even in normal market conditions, Jamie Ingram of the Middle East Economic Survey (MEES) tells EnterpriseAM. Building significant new refining capacity closer to consumers is a harder sell, and there is little appetite for it despite the disruption to refined-product supplies, he adds.

Storing oil abroad comes at a price: Leasing existing storage facilities overseas could cost USD 7-10 per barrel annually, Dalga Khatinoglu, editor-in-chief of Caspian Energy Intelligence, tells us. Building reserves of hundreds of mns of barrels would therefore carry substantial costs if the oil goes unused. Meanwhile, “building storage requires Gulf producers to produce mns of barrels per day above their OPEC+ quotas, while such additional supply would put significant downward pressure on global oil prices,” he adds.

Gulf producers are already putting that storage in Asia: Aramco holds 13.5 mn barrels in Japan and South Korea and agreed last week to pursue storage at Singapore’s Jurong Rock Caverns from 2H 2027. Adnoc plans to raise its storage in India to as much as 30 mn barrels, nearly triple the c. 11 mn barrels it leases there now. At Aramco’s sites in Okinawa and Ulsan, the host government has priority to buy the oil in a shortage.

That leaves Al Jaber’s third fix, new routes out of the Gulf. Adnoc’s {Habshan-Fujairah pipeline can carry around 1.8 mn bbl / d to the UAE’s east coast, and a second line expected to start operating in early 2027 could double that bypass capacity. Saudi Arabia has relied on its 7 mn bbl / d East-West pipeline to move crude to Yanbu on the Red Sea, with onward access to Egypt’s Sidi Kerir terminal, though drone attacks have disrupted the line in recent months.

More refining capacity isn’t necessarily the answer either: “Building more refineries in their home countries is another option. However, this would substantially widen the gap between crude oil production and refining capacity. In normal market conditions, such additional refining capacity would essentially have little practical use and could become economically inefficient,” Khatinoglu argues.

The answer is more routes: Ingram points to the East-West attacks as a sign of how quickly a backup corridor can become another chokepoint. “The name of the game is optionality. The more export routes you have available to you, the less the risk that assailants will be able to close them all down. This is why Saudi Arabia is looking to develop another route beyond just Yanbu or Ras Tanura,” he says. However, “those corridors would remain vulnerable to escalating attacks. The advantage is greater operational flexibility, rather than immunity from disruption,” Khatinoglu notes.

Even with more routes, production sites stay exposed, Ingram says. “The ultimate risk is that production or processing facilities themselves would be attacked. If there was substantial damage to facilities like Saudi Aramco’s Abqaiq plant, that would be more impactful than an attack on export facilities,” Ingram notes.