Strait of Hormuz Disruptions Reduce Global Refined Fuel Inventories to 45 Days of Demand

Disruptions in the Strait of Hormuz are choking one of the world's most critical energy shipping routes, leading to emerging shortages in specific refined products including jet fuel, petrochemical feedstocks like naphtha, and liquefied petroleum gas used to make plastics and chemicals.

U.S. and Israel conducted attacks on Iran in late February, triggering supply disruptions that have pushed crude oil futures over 50% higher.

U.S. West Texas Intermediate crude was trading around $104 per barrel. Goldman Sachs analysts wrote a note on Monday warning that the speed of depletion and supply losses in some regions and products are concerning, with easily accessible refined products buffers approaching very low levels fast.

Global commercial refined product stocks have fallen to about 45 days of demand, according to Goldman Sachs estimates, down from around 50 days of demand before the recent disruption. Total global oil stocks are roughly 101 days of demand. Inventories of naphtha have fallen since late February, including a 72% drop in UAE Fujairah storage and a 37% fall in northwest Europe's Amsterdam-Rotterdam-Antwerp hub storage.

Asia outside China and parts of Europe are particularly exposed to the shortages in refined fuels. South Africa, India, Thailand, and Taiwan are among the more vulnerable markets to shortages, Goldman Sachs analysts wrote. The world's biggest carriers have canceled flights due to tightening jet fuel supplies.

Goldman Sachs estimates that European commercial jet fuel inventories, excluding government emergency reserves, could fall below the International Energy Agency's critical 23-day threshold as soon as June. Goldman Sachs analysts wrote that even if Hormuz flows started recovering soon, any full normalization of deliveries would take at least several weeks.