Supply cliff warning: Société Générale sounds the alarm on "permanent damage" to oil wells

(1) Société Générale has issued a major warning, pointing out that the suspension of crude oil production in the Middle East is pushing the market toward a dangerous tipping point. Analysts Michael Haigh and Ben Hoff from the bank stated bluntly that time has become the core variable: the longer the supply disruption lasts, the greater the probability that what initially appeared to be temporary malfunctions will evolve into permanent supply losses. (2) According to Société Générale's calculations, the threshold for supply risk is very clear. When oilfields are shut down for more than two weeks, risks begin to accumulate; if the interruption lasts more than a month, the situation will deteriorate rapidly. Historical data shows that after months-long shutdowns, oilfield capacity usually only recovers to 80% to 95% of its original level, meaning that part of the capacity will permanently disappear from the market. (3) Even more concerning is that if more oil-producing countries, beyond Iraq and Kuwait, join the production cuts, the situation will spiral out of control. At that point, even if geopolitical conflicts subside, it will become extremely difficult to quickly restore supply levels to pre-crisis levels. This is not simply an emotional shock, but a warning of physical damage to the global energy supply chain. (4) Institutional views suggest that the market's current focus has shifted from short-term disruptions to pricing in permanent capacity damage. Once the market begins to digest this long-term logic, the bottom support for oil prices will become more solid, and any delay in resuming production could trigger a new round of price increases.