Global oil stockpiles could hit record lows if Hormuz Strait stays closed

Global oil inventories are declining rapidly due to the supply disruption in the Middle East, potentially leading to price spikes if the Strait of Hormuz remains closed.

The International Energy Agency warned of higher oil and fuel prices ahead of peak demand this summer, citing shrinking buffers and continued disruptions.

Exxon Mobil CEO Darren Woods mentioned that commercial inventories and strategic reserves have cushioned the impact of supply loss so far, but prices are expected to rise further as inventories deplete.

Stockpiles near record lows

According to UBS analysts, oil inventories have dropped from 8 billion barrels in February to 7.8 billion barrels in April, with projections to reach 7.6 billion barrels by the end of May.

JPMorgan analysts noted that only about 800 million barrels are available without straining the supply chain, emphasizing the need to maintain adequate inventory levels.

JPMorgan’s Natasha Kaneva highlighted the importance of maintaining adequate oil circulation to prevent system failure, pointing out the potential consequences of inventory depletion.

Forecasts suggest that oil inventories could reach critically low levels by September if the Strait of Hormuz remains closed, leading to severe economic implications.

While reaching such low inventory levels is unlikely, price spikes and demand curtailment are expected to occur before a significant economic contraction.