Shell and Equinor Warn of Depleting Energy Safety Buffers — NRG-IA

The global energy market has absorbed an exceptionally large shock in recent months, but the system's capacity to continue doing so is beginning to wane. According to estimates presented by Shell, approximately 36 million tons of LNG and 1.6 billion barrels of crude oil and condensate have been missing from available supply since the onset of the Middle East conflict. Adam Ritchie, Chief Economist at Shell Trading, warns that the mechanisms cushioning these losses are weakening. Anders Opedal, CEO of Equinor, shares a similar assessment, estimating that the effects could become more visible to consumers in the coming months. The figures illustrate the scale of the accumulated pressure. Global LNG trade stood at approximately 422 million tons in 2025, according to Shell. The estimated 36 million tons of lost supply since the conflict began is therefore equivalent to roughly 8.5% of the entire volume of LNG traded globally last year. In the oil market, the cumulative 1.6 billion barrels of unavailable crude and condensate were absorbed without the global market physically running out of fuel. However, the explanation is precisely what now concerns major energy companies: the world has relied heavily on inventories, logistical flexibility, alternative production, and demand destruction to bridge the gap. The Market Resisted by Consuming Its Own Flexibility Buffers A significant portion of the oil that failed to reach the market through normal flows was replaced by barrels already in storage. The International Energy Agency (IEA) estimates that observed global oil inventories fell by approximately 507 million barrels between February and the end of August , corresponding to an average draw of about 2.8 million barrels per day. In August alone, the drawdown was approximately 95 million barrels. This figure cannot be directly subtracted from Shell's 1.6 billion-barrel estimate, as the two datasets measure different metrics. Together, however, they demonstrate how the system operated: a portion of the oil that failed to arrive from expected flows was replaced by drawing down previously accumulated reserves. This mechanism has a physical limit. Every barrel drawn from storage to balance the market today means one less barrel available for the next disruption, and a volume that must eventually be replenished. High Prices Destroyed a Portion of Demand The second buffer was consumption. High LNG prices curtailed purchases by some Asian economies, particularly demand that could be deferred or substituted. This phenomenon allowed Europe to attract more cargoes ahead of winter, at a time when its own storage facilities are insufficiently replenished. However, balancing through demand destruction carries a real economic cost. Gas does not become more abundant when an industrial consumer stops buying it because it is too expensive; competition for the available volume simply decreases. The same mechanism applies to transport, industry, and other energy-intensive sectors: sufficiently high prices reduce consumption and rebalance the market, but this stabilization comes at the expense of reduced economic activity or fuel switching. Shell points to this weaker demand, particularly from China, as one of the key mechanisms that helped the market weather the initial months of the shock. Alternative Routes Kept Oil Flowing Logistics served as the third major buffer. Tankers were rerouted, exporters utilized alternative infrastructure, and available pipeline capacities became strategic assets. Saudi Arabia ramped up its East-West Pipeline to its maximum capacity of 7 million barrels per day to transport oil to Yanbu on the Red Sea coast, bypassing the Strait of Hormuz. When this route was disrupted in September, Aramco began offering Asian buyers oil via ship-to-ship transfers off Sohar, Oman. While this new setup does not replace the capacity of the Petroline, it demonstrates how heavily market balance relies on constantly finding alternative logistical solutions. The issue arises when these routes also near their limits or become vulnerable themselves. The physical flexibility of the global energy system is not infinite. The Americas Produce More, But Cannot Cover the Entire Deficit Rising production outside the primary affected regions provided another layer of protection. The IEA estimates that producers in the Americas will add approximately 1.4 million barrels per day to non-OPEC+ supply in 2026. In LNG, the expansion of North American production and improved performance at some liquefaction facilities also brought additional volumes. However, the offset remains incomplete. For 2026, the IEA projects global oil supply at approximately 100.7 million barrels per day , which is 5.7 million barrels per day below the previous year's level. In August, global production fell to around 100.1 million barrels per day, with over 10 million barrels per day of Gulf production capacity remaining offline due to security and transport…