A more severe crisis in the international oil market is imminent—and will last longer than expected.

The International Energy Agency (IEA) stated in its latest monthly report that global oil supply is expected to decline by approximately 3.9 million barrels per day (bpd) this year—a figure far below the current actual supply shortfall in the Middle East. The IEA estimates the Middle East’s supply gap at 10.5 million bpd. Yet, although supply is projected to fall by 3.9 million bpd (a perhaps optimistic forecast), demand is expected to drop by only 420,000 bpd, according to data from this authoritative energy institution. “Consumption can only shrink so much—once inventories are depleted, they’re truly gone,” Ellen Wald, Senior Fellow at the Global Energy Center of the Atlantic Council, told The Wall Street Journal this week. “At a certain point, markets will clash, and prices will surge accordingly.” This echoes an earlier warning issued this month by Amin Nasser, CEO of Saudi Aramco, who said global onshore fuel inventories are being drawn down at a record pace. As reported by the Financial Times, Nasser described these inventories as “the only buffer currently available,” but noted they have “declined substantially.” According to the Financial Times, commodity analysts at JPMorgan have also joined the chorus of warnings, stating that commercial oil inventories in developed countries may reach “an operational tipping point” next month—meaning supply shortages will become even harder to control than they are today. JPMorgan’s Natasha Kaneva said: “Our conclusion is that the Strait [of Hormuz] will reopen in June, no matter what.” She pointed out that the end of the war would be the sole way for the world to avoid shortages. If that does not happen, “the next phase of this shock may look less like a traditional crude price spike and more like a refining and end-user fuel crisis.” The bank’s Global Head of Commodities Strategy added that only “a clear, credible statement explicitly endorsed and confirmed by both sides” could calm markets. Aramco’s Nasser recently commented that traders may have overestimated the volume of oil actually available in inventories—further deepening pessimism. He explained that not all oil counted in inventory is practically usable. In fact, only a small fraction is. “The rest is tied up in pipeline fill, minimum tank levels, and other day-to-day operational constraints.” Moreover, there is a daily limit on how much oil can be withdrawn from inventories: “In Europe and the U.S., no more than 2 million barrels per day can be drawn from inventories,” Aramco’s CEO stated. According to Kpler, the current pace of inventory drawdown is moderate. The firm estimates that cumulative onshore oil withdrawals since late March amount to 60 million barrels, with roughly 3 billion barrels still remaining in storage—or rather, the portion that remains accessible. However, the longer the Middle East supply disruption persists, the more oil must be drawn from inventories while no replenishment arrives. In other words, if the war extends beyond this month, the inventory buffer will shrink further. That said, there is some relatively positive news: traders are gradually adapting to the situation. As reported by The Wall Street Journal, inventory drawdowns have partially cushioned the impact of supply disruptions. Although prices will continue rising, panic is now giving way to resource-shortage management.

Global oil inventories are running critically low: Is a genuine energy disaster about to erupt within a month?

Goldman Sachs forecasts that OECD commercial oil inventories will fall to 57 days of demand in June—the lowest level since 2018—though still above the historical average of about 53 days seen before the shale oil revolution (2000–2005). Notably, China and Singapore are among the few regions where refined product inventories have increased, primarily due to reduced refined product exports. Asia-Pacific: Replacement imports cover only part of the shortfall The Asia-Pacific region is the biggest victim of this supply shock. In April, the region’s oil imports from the Persian Gulf plunged by 11 million bpd year-on-year, causing total regional imports to drop by over 40%. In response, the region’s situation diverges sharply between refined products and crude oil. For refined products, export cuts enabled the Asia-Pacific region to offset roughly 70% of the Persian Gulf import shortfall, resulting in only a ~700,000-bpd decline in net refined product imports. For crude oil, however, alternative suppliers covered less than 40% of the shortfall, leading to a 7-million-bpd year-on-year drop in net crude imports in April—directly constraining domestic refining capacity and refined product supply. Goldman Sachs believes that, taking into account national crude inventory levels, South Africa and India face the highest risk of refined product shortages. Geographically, recent news reports on acute shortages have shifted—from Thailand and India one month ago—to Malaysia and Bangladesh more recently—confirming the judgment that the supply shock is continuing to spread outward. Europe: Jet fuel shortage alert could trigger as early as June Europe’s most urgent threat stems from jet fuel shortages. Goldman Sachs, jointly with European energy and transportation equity analysts, estimates that, under assumptions including Persian Gulf export flows returning to normal by end-June, a 3% decline in jet fuel demand, and a 50% import replacement rate, Europe’s commercial jet fuel inventories (excluding government emergency reserves) could fall below the IEA’s critical shortage threshold of 23 days in June. The UK is considered the European country at highest risk of jet fuel rationing, owing to its greatest dependence on net imports. France and Germany, though appearing to hold ample total inventories, have 70%–75% held as government emergency reserves; their commercial inventories cover only 16 and 17 days respectively—both already below the IEA’s 23-day threshold. Real-time weekly data from the ARA region (Amsterdam–Rotterdam–Antwerp) corroborates this assessment—jet fuel inventories are being rapidly depleted. On the demand side, JPMorgan data shows global oil demand averaged a 2.8-million-bpd decline in March, with the tracked decline widening to 4.3 million bpd in April and projected to widen further to ~5.5 million bpd in May. Earlier in March, the IEA coordinated member-country releases of 400 million barrels from strategic reserves, with the U.S. Strategic Petroleum Reserve (SPR) accounting for nearly half of that supply boost. Energy giants sound the alarm in unison—markets enter countdown mode According to Bloomberg, a team led by Morgan Stanley strategist Martijn Rats warned in a Monday report that if the blockade persists into late June or even July, Brent crude “will have to complete the price adjustment it has thus far managed to avoid.” Its base-case scenario forecasts Brent averaging $100/bbl in Q3, falling to $90/bbl in Q4, and declining further to $80/bbl by 2027. But under the worst-case scenario—where U.S. and Chinese buffer stocks are exhausted—Brent could surge to $130–$150/bbl before any “rescue reopening” occurs.

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