FINWIRES · TerminalLIVE
FINWIRES

Middle East Energy Crisis Favors Exporting Nations, Says WoodMac

By

Global energy exporters are the biggest beneficiaries of the prolonged Middle East supply disruption, while fuel-importing developing economies face higher energy bills, inflation and weaker currencies, Wood Mackenzie analysts said on Thursday in an interview with.

Major oil-producing countries led primarily by the US, Saudi Arabia, and the UAE have capitalized on surging commodity prices and resilient production structures, insulating them from the chaos shaking the wider market.

"The structural winner of this is arguably the US," Alan Gelder, Vice President of Refining, Chemicals, and Oil Markets at Wood Mackenzie said, citing the country's position as the world's largest oil producer.

The consultancy estimated the market has already lost roughly 10 million barrels per day of supply, creating what analysts described as the largest energy shock in modern history.

"To destroy 10 million barrels a day of demand, you need an oil price of about $200 a barrel," Gelder said. The buffer of reserves that has softened the impact of the Strait of Hormuz is finite however and running down quickly.

Peter Martin, Head of Economics at Wood Mackenzie said the consultancy's extended disruption scenario points to a 0.4% contraction in global GDP growth this year, alongside persistently high inflation and weak growth into next year.

Meanwhile, in the US, energy majors like ExxonMobil (XOM) and Chevron (CVX) have posted robust financial performance, insulated by domestic crude production hovering near historic highs of 13.6 million barrels per day.

Concurrently, oil companies in the Gulf are leveraging their vast infrastructure to bypass logistical chokepoints and secure massive financial windfalls.

Saudi Aramco recently announced a staggering $32.5 billion in net income for Q1 driven by higher realized prices for crude oil and refined products.

Aramco has kept its exports moving to global markets by cranking up its East-West Pipeline up to its maximum capacity of 7.0 million barrels per day.

Similarly, the UAE's ADNOC reported its strongest Q1 performance on record. Net profits climbed to $347 million on the back of aggressive regional expansion and high rig utilization.

The windfall is not restricted to crude, as Wood Mackenzie noted that global Liquefied Natural Gas exporters and coal producers have also emerged as winners as buyers scramble to find substitutes to both oil and gas.

Fuel-importing developing economies, including Pakistan and several African nations, find themselves caught between surging international prices and a shrinking pool of physical supply.

Related Articles

Oil & Energy

Gulf Output Recovery to Take Months Even if Hormuz Reopens Soon, Says WoodMac

The restoration of Middle Eastern oil production will take months, even if exports return to normal soon, Wood Mackenzie analysts toldin an interview.The analysts warned that long-term damage to reservoirs and logistics will slow a return to energy market normalcy until many weeks after the geopolitical backdrop stabilizes.An estimated 11 million barrels per day of upstream production is currently 'shut in' across the region due to the conflict, excluding Iran, where additional disruption is beginning to emerge.While public attention remains fixed on a potential diplomatic breakthrough to reopen the Strait of Hormuz, energy analysts stress that markets will not normalize the day after.Shipping logistics will be the primary constraint for several weeks as operators sort out war-risk insurance, clear full storage tanks, and wait for empty vessels to arrive. After that upstream production will become the next hurdle, the analysts said.Fraser McKay, Head of Upstream Analysis at Wood Mackenzie, said in an interview withon Thursday that some heavily-affected fields are currently producing a mere 20% of normal output.While initial recovery from major fields will be fast enough to meet early export volumes, a return to baseline capacity will take significant time, he added.McKay estimates that severely impacted operations will likely recover to roughly 70% of pre-crisis output after three months, and it will take six to nine months to claw back to about 90% of baseline production.Operators face rigid technical limits, since ramping up production too quickly risks causing reservoir pressure to drop permanently or it could trigger a catastrophic entry of water.The recovery process is expected to be uneven across the Middle East, dictated by onshore storage capacity and the technical characteristics of production assets. Restart times will also increase the longer assets are disrupted."it's not just a case of switching the production on. It's A carefully managed process. It takes time and the challenges that each country, each field, and each well faces are all unique," McKay said.While Saudi Arabia and the UAE maintain roughly a month's worth of storage buffer to manage a staggered restart, Kuwait and Iraq are operating with less than two weeks of storage safety cushion.Iraq faces the steepest uphill battle of all. Its recovery path is severely complicated by operational complexity, underlying financial pressures on the government, and deep political fragmentation.Analysts emphasize that the longer the shutdown persists, the more challenging it becomes for places like Iraq to safely manage and restore its production without causing lasting reservoir damage.These technical warnings come amid frantic diplomatic maneuvering, with US and Iranian negotiators reportedly closing in on a Memorandum of Understanding that would extend the current ceasefire for 60 days.The proposed deal aims to guarantee "unrestricted" passage for commercial vessels through the Strait of Hormuz without the payment of tolls to Tehran.Market reaction will likely be guarded though, after a roller coaster ride of supposed breakthroughs and US President Donald Trump's claims of Iran's eagerness for a peace deal with few signs of corresponding deeds.

Oil & Energy

EMEA Natural Gas Update: Futures Rise as Uncertainties Cloud US-Iran Peace Deal

European natural gas futures were up on Friday, after US Vice President JD Vance hinted that the peace deal between the US and Iran could take longer than expected.The Dutch TTF front-month contract was up 0.10% at 47.020 euros ($54.78) per megawatt hour, while the UK NBP front-month contract rose 0.33% to 113.800 British pence ($1.53) per therm.Both the Dutch TTF and UK Gas were set to end the week down by 3.24% and 3.16%, respectively, according to Trading Economics.Multiple media outlets reported that the US and Iran have agreed on a 60-day ceasefire extension, pending the approval of US President Donald Trump. However, comments by Vance, and latest push back from Iran, through Tasnim news agency, suggest the war is anything but over yet.Vance told reporters on Thursday that it was too early to say "when or if" the two warring sides would finalize an agreement, adding to the uncertainties.Meanwhile, the strategically crucial Strait of Hormuz remained effectively closed for the 13th week running, with just five vessels transiting over the past 24 hours, according to the Hormuz Strait Monitor.Iran's Islamic Revolutionary Guard Corps said on Friday that 24 vessels had transited via the Strait over the past 24 hours, in coordination with Iranian authorities, according to an Al Jazeera report, citing Iran's Fars News Agency.Daniel Hynes, a senior commodity strategist at ANZ, noted that the Strait's closure was now building to a point where "European buyers will be in a fight for any available LNG."This comes as European gas inventories remain depleted at just 39.13% of capacity, compared to 46.88% during the corresponding period a year ago, according to Gas Infrastructure Europe.Inventories were also considerably lower than the five-year average for this period, at 52.8%, according to the Swiss Federal Office of Energy.In a meeting of the European Commission's Gas Coordination Group on Tuesday, member states assured that the region's gas inventories could touch 80% of capacity by the end of the Summer, while still noting the importance of regular storage assessments.Uniper, a German utility, has, however, pushed back against this claim, while sounding the alarm on storage inventories being refilled very slowly, with the company's CEO, Michael Lewis, warning that it will face supply issues in winter if the inventories are not filled quickly.

Oil & Energy

Middle East's Oil Dominance Safe Despite Hormuz Strait Disruption, WoodMac Says

The prolonged closure of Strait of Hormuz may reshape some global energy investment flows, but Middle Eastern dominance in low-cost oil will keep investors in the region, analysts at consultancy Wood Mackenzie toldon Thursday.The Middle East will remain the epicenter of global energy supply due to its unmatched scale and production costs. The region accounts for a one-fifth of global upstream development spending and holds many of the world's largest low-cost oil resources, analysts said.While new frontiers carry higher start-up costs, major Gulf producers retain an advantage with total production costs of below $10 per barrel compared to more than $23 for US shale and $34 for offshore Brazil."These are some of the lowest cost barrels in the world, they are still likely to remain absolutely competitive in the global marketplace," Fraser McKay, Head of Upstream Analysis at Wood Mackenzie, said.Wood Mackenzie said higher shipping costs and geopolitical risk premiums could slightly improve the attractiveness of rival oil-producing regions such as Latin America, West Africa, and US shale.The analysts added that countries such as Guyana, Argentina, and Mozambique could become relatively more attractive for new energy investment in the event of any diversification of supply away from the Middle East.However, the consultancy does not expect a large-scale capital flight away from the Gulf. Instead, investors are likely to seek to "negotiate better terms with the host governments in the Middle East", McKay said.This outlook comes at a critical time for global energy security.International Energy Agency Chief Fatih Birol recently warned that current oil and gas disruption has now surpassed in gravity all past major crises, including the 75 billion cubic meters of gas supply llost after Russia's invasion of Ukraine.The attacks have damaged more than 80 energy facilities across the region-including oil fields, gas sites, and refineries-with more than one-third categorized as very severely damaged, the IEA said.