Organization: Iran War Depleting Global Oil Cushion Stocks at Unprecedented Pace

BlockBeats News, May 9th, as the Iran conflict has disrupted oil shipping in the Persian Gulf, global oil inventories are being rapidly depleted at a record pace, eroding the buffer stockpile that was meant to cushion against supply shocks. The swift contraction of inventories means that the risk of more extreme price spikes and supply shortages is looming ever closer.

With the Strait of Hormuz nearing closure for two months, governments and industries around the world are running out of options to handle the impact of a loss of over 1 billion barrels of supply. The rapid depletion of inventories also implies that even after the conflict is resolved, the market will remain vulnerable to future supply disruptions for a longer duration.

Morgan Stanley estimates that between March 1st and April 25th, global oil inventories depleted by an average of around 4.8 million barrels per day, far surpassing previous peaks in quarterly inventory drawdowns compiled in the International Energy Agency's data. Nearly 60% of this drawdown was from crude oil, with the remainder being refined products. The key is that the oil system also requires setting a minimum inventory level.

Natasha Kaneva, Head of Global Commodities Research at JPMorgan, noted that this means that the part of the strategic reserves that cannot be further tapped into has been reached before inventories truly bottom out.