Shell CEO Warns Oil Market is Losing Its 'Shock Absorber'
Shell CEO Wael Sawan warned that the "shock absorber" in the oil market is weakening. Buffer mechanisms such as commercial inventories, strategic reserves, and logistical flexibility are gradually depleting, and even small supply disruptions could trigger price surges.
He pointed out that the refined oil market (diesel, gasoline) is tighter than crude oil, facing "triple threats" from attacks on Russian refineries and shipping risks in the Persian Gulf and Red Sea. Shell has increased jet fuel production by 20% to address the tight situation. Sawan stated that the market will face challenges in the coming months and efforts are needed to alleviate customer pressure.
Market mechanisms indicate that event-driven expectations are heating up for refined oil supply tightening. Capital is flowing into refined oil-related positions and alternative supplies, benefiting integrated companies with flexible refining capabilities, while consumer countries reliant on imported refined oil are under pressure. After buffers are depleted, the amplification effect of any new shocks will be significantly enhanced.
Source: Public Information
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Sawan attributes the current market resilience to accumulated inventories and reserves from the past, but clearly states that these "shock absorbers" are wearing out. The refined oil side is showing pressure earlier than the crude oil side, reflecting the direct impact of refinery disruptions and shipping restrictions. Shell's increase in jet fuel production indicates that the company is proactively adjusting its product structure.
In terms of capital flow, energy giants are switching internal refining capabilities to respond to regional shortages while warning of a decline in systemic buffers. This follows a similar path to inventory consumption after past geopolitical conflicts, but the current multiple disturbances may extend recovery times. We are currently in a warning phase of amplified volatility after buffer depletion.
This is analogous to the market response after the strategic reserves were utilized during the 2022 energy crisis.
Essentially, this is a restructuring of the supply chain. The mechanism is that ongoing geopolitical and infrastructure shocks continuously deplete commercial and strategic inventories, thinning the buffer layer that originally absorbed shocks, leading to increased price sensitivity to supply disruptions.
ABAB News · Law of Cognition
Once the shock absorber wears out, small shocks will turn into large fluctuations.
The tightness of refined oil often signals alarms earlier than crude oil.
After buffers are depleted, the real test for the market is just beginning.