Eni CEO Claudio Descalzi has cautioned that the ongoing energy crisis is likely to intensify in the short term, highlighting a critical shortage of 4.5 million barrels of product and an additional 12 million barrels of crude oil supply. He attributed this shortfall to recent events in the Gulf, which he described as the most significant supply disruption in the past 40 years. Descalzi emphasized that the primary concern is not prices but rather the availability of volumes, noting that the physical oil market in Asia is seeing prices as high as $150 per barrel for spot cargoes, even as WTI futures have fallen to $95.2 for June delivery. This disparity indicates that oil and products are flowing to regions offering the highest prices, making it challenging for Europe to secure necessary supplies.
Descalzi specifically pointed to severe issues in Europe's refined product market, particularly for jet fuel and diesel. Europe imports 35% of its 60 million tons of annual jet fuel needs and faces difficulties competing for diesel, especially with strong demand from Asia. The situation is compounded by the closure of 36 European refineries in recent years, which has eroded the continent's self-sufficiency in production. He cited an instance where 600 Eni service stations ran out of diesel over a weekend, attributing it to low prices and surging demand.
To mitigate the worsening crisis, Descalzi proposed suspending the European Union's ban on Russian liquefied natural gas (LNG), which is set to take effect on January 1, 2027, and would impact 20 billion cubic meters of gas. He argued that gas is crucial for grid flexibility, which renewables and nuclear power cannot provide. He also suggested reviewing the Emissions Trading System (ETS) to avoid further burdening the industrial sector. The CEO stressed the need for a pragmatic approach to the extraordinary situation, criticizing radical and dogmatic policies.
Descalzi also warned about the broader implications of geopolitical tensions, including the closure of the Strait of Hormuz, which he views as a major threat. According to Aramco CEO Amin Nasser, a weekly closure of the strait could result in a 100 million-barrel loss in global oil markets. The Eni chief's commentary underscores a growing concern among energy leaders about the fragility of global supply chains and the potential for a severe economic downturn if these issues are not addressed swiftly. While Descalzi reassured that Italy's gas needs could be met through diversified sources, the overall European outlook remains precarious.
