Rosneft CEO Igor Sechin said on Saturday US energy companies were the main beneficiaries of the closure of the Strait of Hormuz but warned that continued tensions in the artery for one fifth of the world’s crude would undermine long-term demand for oil.
Iran blockaded the Strait, the main route for about a fifth of world oil supplies and other vital goods, including fertilisers, after the US and Israel attacked Iran and killed supreme leader Ayatollah Ali Khamenei in February. The US has blockaded Iranian ports.
Sechin, a close ally of President Vladimir Putin and one of the most influential men in Russia’s energy sector, cast the US actions as an attempt to change the fundamental contours of the global energy markets to suit US interests but added that the strategic risks had not been fully assessed.
“The closure of the Strait of Hormuz is an attempt to reshape global energy market regulations to benefit the US. The measures taken to block the strait were aimed at Iran but backfired on the entire world. The strategic risks were underestimated,” Sechin said at the St Petersburg International Economic Forum.
“The main beneficiaries, of course, were American companies, which gained non-competitive advantages and the ability to secure high-cost supplies,” he said. “Continued tension in the Strait of Hormuz for a long time undermines the long-term demand for oil. It may also trigger another surge of interest in alternative energy.”
Continued tension in the Strait of Hormuz for a long time undermines the long-term demand for oil. It may also trigger another surge of interest in alternative energy.
— Rosneft CEO Igor Sechin
The US is the world’s biggest oil producer, followed by Saudi Arabia and Russia.
Russia’s oil and gas tax revenue, which accounts for about a fifth of total budget income, increased by 32.4% year-on-year in May to 678.9bn roubles (R152.67bn), finance ministry data showed, thanks to a global oil price rally fuelled by the Middle East war. The US has also extended a sanctions waiver allowing purchases of Russian seaborne oil to aid “energy-vulnerable” countries hit by the Iran war.
Sechin said China had been best prepared for the crisis due to well-thought-out state policy but cautioned that other major global routes, such as the Malacca, Bab El Mandeb and Gibraltar straits, could also be under the risk of disruption.
If the Strait opens in the near future, then the oil price will be at $95 to $96 per barrel by the end of the year, and in a year it will drop to $80 to $85, and by the second half of 2027 there will be a return to market fundamentals, he said.
A dangerous world
In a speech titled “The beginning of the end or the end of the beginning: what is left at the bottom of Pandora’s box?”, Sechin said problems were “snowballing” in the world with the militarisation of major powers, the biggest financial market bubble since the 19th century and a looming deficit of electricity, food and water.
“At the bottom of the box, we will inevitably find a global shortage of electricity, food shortages, copper and other metals, and water shortages,” he said.
Sechin, who is known for his scepticism about Russia’s co-operation with the Organisation of Petroleum Exporting Countries (Opec), said the Opec+ group has lost some of its potential after the UAE’s departure from the alliance, as well as the earlier exits of Qatar and other countries.
“As a result, the alliance’s production has fallen from 58-million to 37-million barrels per day over the past 10 years.”
Sechin also said most major Opec+ members have increased production since the agreement was signed in 2016. In Russia, oil production fell by 1.5-million barrels per day.
“This is a 15% decline that will need to be offset by necessary investments of at least 10-trillion rubles (R2.25-trillion). We expect that investment co-operation between the alliance’s member countries and our country will also expand,” Sechin said.
Reuters
