IEA Reports Global Oil Inventories Declining

The International Energy Agency warned that oil price spikes are likely to continue over the peak summer demand period as global inventories are drawn down at a record pace. The agency's May oil market report stated that global oil supply declined by a further 1.8 million barrels per day in April.

That brought total losses to 12.8 million barrels per day since the U.S.-Israeli war with Iran began on February 28. Flows of crude oil and fuels through the Strait of Hormuz fell by nearly 6 million barrels per day in the first quarter of 2026. "More than ten weeks after the war in the Middle East began, mounting supply losses from the Strait of Hormuz are depleting global oil inventories at a record pace," the IEA wrote in the report released Wednesday.

International benchmark Brent futures traded near $107 per barrel that day while U.S. crude oil futures stood just above $101 per barrel. The U.S. Strategic Petroleum Reserve fell by 8.6 million barrels last week. That marked the largest weekly drop on record and surpassed the previous record set in 2022.

The drawdown left emergency crude reserves at their lowest level since October 2024. Commercial crude and gasoline inventories also declined sharply amid continued disruptions linked to the Strait of Hormuz closure and strong export demand. One analysis showed the SPR put more than 1.2 million barrels per day on the market last week, helping sustain elevated American oil exports.

The IEA flagged further demand destruction from the war, forecasting a contraction of 420,000 barrels per day by the end of 2026. Global oil demand is now projected to reach 104 million barrels per day for the year. The petrochemical and aviation sectors are currently most affected, but higher prices, a weaker economic environment and demand-saving measures will increasingly impact fuel use, the agency said.

Despite the loss of demand, the IEA still expects the oil market to end the year in a deficit. One forecast projected the market will lose another billion barrels over the course of 2026 due to the time required to restart oilfields, repair refineries and reposition the tanker fleet.

OPEC+ agreed to increase oil output by 188,000 barrels per day effective in June. The decision came in the group's first meeting since the loss of one of its key members. The seven remaining major producers announced the hike after raising output by 206,000 barrels per day the prior month.

Both government and commercial stockpiles are being released to offset some of the supply losses from the Middle East. The IEA said oil price spike turmoil is far from over. Inventories continue to plunge even as the Iran war has cut into oil consumption.

“That this is the largest oil supply disruption in the history of the oil market is neither an exaggeration nor controversial.”

The drawdown of emergency reserves and commercial stocks has helped keep U.S. exports elevated even as domestic inventories tighten further.