Global Oil Inventories Fall at Record Pace as Conflict Disrupts Hormuz Strait

Global oil inventories have been drawn down at a record pace during the Iran war, with stockpiles falling by about 4.8 million barrels a day between March 1 and April 25. The depletion, which exceeds previous quarterly peaks tracked by the International Energy Agency, has consumed much of the buffer that normally cushions supply shocks after Iran throttled shipping through the Strait of Hormuz at the end of February.

Crude oil accounted for nearly 60 percent of the decline, according to Morgan Stanley, with the remainder coming from refined fuels. Visible global oil stocks are already close to their lowest levels since 2018, Goldman Sachs reported, though the pace of drawdown appeared to slow slightly in recent days amid weaker demand from China.

’s head of global commodities research, said. She warned that OECD inventories could reach operational stress levels early next month and operational minimum floors by September if the strait does not reopen. U.S. crude stocks, including the Strategic Petroleum Reserve, have declined for four straight weeks, while distillate stockpiles hit their lowest point since 2005 and gasoline stocks hovered near 2014 seasonal lows.

Fuel-import reliant countries in Asia are showing the earliest signs of stress. Traders identified Indonesia, Vietnam, Pakistan and the Philippines as the most vulnerable, with some potentially reaching critical supply levels within a month. Japan and India have seen stockpiles fall to at least 10-year seasonal lows, according to geospatial analytics firm Kayrros.

Diesel, naphtha and LPG supplies have been particularly strained in parts of Asia. Pakistan’s petroleum minister said in late April that the country held roughly 20 days of commercial reserves of refined products. India’s oil ministry stated on May 3 that refineries maintained adequate crude inventories, though state-run refiners privately acknowledged significant drawdowns.

In Europe, jet fuel inventories in independent storage at the Amsterdam-Rotterdam-Antwerp hub have fallen by a third since the war began, reaching a six-year low. Summer travel demand could push stocks to critically low levels within five months, according to Insights Global.

The UK, Germany and France are considered most exposed because of heavy air traffic and limited local production.

and Long-term Replenishment Needs

Governments have pledged to release a record 400 million barrels from emergency reserves in a coordinated effort led by the IEA. The U.S. has so far utilized about 79.7 million barrels of the 172 million it committed, leaving the Strategic Petroleum Reserve on track for its lowest level since 1982 if fully drawn.

Germany is re-offering previously untaken crude and jet fuel and has said it will take further steps if shortages emerge. Releasing additional strategic stocks to restrain prices would further erode the global buffer, creating a policy dilemma. Even after the Strait of Hormuz reopens, the sharp reduction in inventories will require months of restocking.

Plains All American Pipeline LP Chief Executive Officer Willie Chiang said on an earnings call Friday that the current destocking environment is likely to continue for several months before driving a restocking wave that could see some countries rebuild reserves above pre-war levels.

>"A lot of the inventory and spare capacity has been depleted already. " — Eimear Bonner, Chevron Corp. Chief Financial Officer, May 1 (Fortune) The conflict has already driven higher physical crude and fuel prices, contributing to inflation risks and prompting reduced global oil consumption.

Some analysts predict prices will need to rise further to force additional demand destruction of roughly 5.6 million barrels per day between June and September.

Automakers and other manufacturers are beginning to report disruptions. Lucid Motors warned last week that the conflict had disrupted supplies of materials critical to its manufacturing processes and raised the prospect of substantially higher raw material costs.

Other carmakers have been accused of complacency for assuming the situation would resolve quickly. BMW finance chief Walter Mertl said on Wednesday that the war had only a limited impact on the company so far and expressed confidence in a near-term solution.

Broader supply chain mapping remains incomplete for many firms, particularly at the third- and fourth-tier supplier level, according to industry participants. Beyond oil, experts have flagged rising prices and potential constraints for fertilizer, aluminum and chemicals used in manufacturing.

European consumers are expected to face higher prices for goods even without outright shortages, as global commodity costs rise. The longer the Hormuz closure persists, the greater the risk that current inventory cushions will be exhausted, amplifying economic effects that have so far been partially masked by strategic stockpiles and demand reduction.