Global oil stockpiles could hit record lows if Strait of Hormuz remains closed
... Inventories were near a decade high at just over 8 billion barrels at
the end of February, Swiss bank UBS estimated in a Tuesday report. By
end of April, stockpiles fell to 7.8 billion barrels, UBS analysts said.
Inventories
will approach record lows of 7.6 billion barrels by end of May if
demand remains the same month over month, the UBS analysts said.
Inventories falling to that level would stress the supply chain,
JPMorgan analysts said in an April 30 note.
Billions of barrels
in inventory may sound like a lot but the reality is that only about 800
million barrels are available without straining the system, the
JPMorgan analysts said. The rest is needed to keep pipelines and tanks
filled at minimum levels so the supply chain operates efficiently, they
said.
“Like blood pressure in the human body, the issue is circulation,” said
Natasha Kaneva, JPMorgan’s head of global commodities strategy. “The
system does not fail because oil disappears, it fails because the
circulation network no longer has enough working volume.”
Oil inventories would fall to a critically low level of 6.8 billion
barrels by September if Hormuz is still closed at that time, JPMorgan
forecast. Product inventories would hit critical levels sooner in July
or August, according to a forecast from Rapidan Energy.
The
global economy would “seize up, with critical transportation
infrastructure unable to source fuel at any price,” Rapidan analysts
said in May 7 note.
But inventories are very unlikely to reach
these critically low levels, the analysts said. Instead, oil and product
prices will spike to curtail demand which will cause “a severe economic
contraction.”
“That’s likely to happen before 3Q26,” the Rapidan analysts said.
