Global oil inventories are depleting at a pace the market can no longer ignore. Multiple top-tier Wall Street institutions warn that if the blockade of the Strait of Hormuz persists into June, energy markets could rapidly transition from superficial calm to a structural crisis—with localized supply disasters potentially arriving faster than most anticipate.
Peace negotiations remain stalled, oil futures continue to trade above $100 per barrel, and the US April CPI year-on-year rose to 3.8%, nearing a three-year high, putting pressure on stock markets. Morgan Stanley warned this week that the oil market is at a critical "race against time" juncture. If Brent crude is forced to "complete the price work it has so far avoided," it could surge to $130-$150 per barrel in a worst-case scenario.
Goldman Sachs' latest research report reveals a deeper risk: macro-level "aggregate security" is masking a micro-level "structural crisis." Naphtha, liquefied petroleum gas (LPG), and jet fuel face the most immediate shortage pressures, with the Asia-Pacific region (excluding China) and Europe bearing the initial brunt. JPMorgan analysts warn that commercial crude oil inventories in developed nations could approach operational pressure thresholds as early as early June.
**Global Inventories: Superficial Security, Actual Emergency**
Goldman Sachs estimates that current total global oil inventories (covering commercial and strategic reserves, onshore and floating, crude and products) equate to approximately 101 days of global demand, down 4 days from 105 days at the end of February. At the current depletion rate of about 3 days of inventory per month, this is projected to fall further to 98 days by the end of May.
This figure appears, on the surface, to remain above two key thresholds: the EU's minimum 61-day emergency reserve requirement for member states, and the estimated 30-40 days of minimum operational onshore inventory for the global oil system.
However, estimates from Wall Street institutions themselves show significant divergence. Morgan Stanley estimates global commercial and strategic crude oil inventories at 5.75 billion barrels, Societe Generale at approximately 7.8 billion barrels, and JPMorgan at about 8.2 billion barrels. All three incorporate official and private data, and all are below the peak level of around 9 billion barrels in 2020.
Antoine Halff, a researcher at Columbia University's Center on Global Energy Policy and co-founder of geospatial analytics firm Kayrros, points out that inventory drawdowns are "extremely unevenly distributed regionally and by product type, with the largest declines occurring in the parts of the market with the lowest visibility."
He noted that crude oil inventories in the Asia-Pacific region (excluding China) have fallen by about 12% since the conflict began on February 28, reaching their lowest level in at least a decade. Goldman Sachs also warns that even if Hormuz export flows begin to recover soon, global visible product inventories could hit their lowest levels since 2018, as any full normalization of deliveries will still take several weeks.
**Refined Products: The Fastest-Depleting, Highest-Risk Link**
The Goldman Sachs report explicitly states that among all inventory categories, onshore commercial refined product inventories are the fastest-depleting, least visible, and most risk-concentrated segment.
Goldman estimates global commercial refined product inventories have rapidly decreased from 50 days of demand pre-conflict to 45 days currently. Within this, non-OECD product inventories have plunged from 49 days to 43 days, a sharp 10% drop, marking the most severe depletion segment. OECD product inventories fell from 40 days to 38 days, a decline of about 5%. In contrast, global onshore commercial crude inventories have remained largely flat at around 39 days of demand, providing some buffer for nations with refining capacity.
Goldman Sachs projects 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 from 2000-2005 before the shale revolution. Notably, China and Singapore are among the few regions where product inventories have increased, primarily due to reduced product exports from both locations.
**Asia-Pacific Region: Alternative Imports Only Partially Fill the Gap**
The Asia-Pacific region is the biggest victim of this supply shock. In April, the region's oil imports from the Persian Gulf plummeted year-on-year by 11 million barrels per day (bpd), causing the region's total imports to fall by over 40%.
The situation for refined products and crude oil in the region is markedly different.
For refined products, by cutting exports, the Asia-Pacific region has offset about 70% of its Persian Gulf import shortfall, with net imports declining by only about 700,000 bpd. For crude oil, alternative suppliers have been able to fill less than 40% of the gap, leading to a year-on-year drop of 7 million bpd in Asia-Pacific crude net imports in April. This directly squeezes domestic refining capacity and product supply availability.
Goldman Sachs believes that considering each country's own crude inventory levels, South Africa and India face the highest risk of product shortages. Judging by the geographical distribution of recent news reports, the epicenter of acute shortage reports has shifted from Thailand and India a month ago to Malaysia and Bangladesh recently, confirming the judgment that the supply shock continues to spread outward.
**Europe: Jet Fuel Shortage Alert Could Trigger as Early as June**
The most immediate threat facing Europe is jet fuel.
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% drop in jet fuel demand, and a 50% import substitution rate, European commercial jet fuel inventories (excluding government emergency reserves) could fall below the IEA's critical shortage threshold of 23 days as early as June.
The UK is considered the European nation with the highest risk of jet fuel rationing due to its highest reliance on net imports. While France and Germany appear to have ample total inventories, 70% to 75% of that is government emergency reserves. Their commercial inventory cover stands at just 16 and 17 days, respectively, both already below the IEA's 23-day critical threshold. Weekly real-time data from the ARA (Amsterdam-Rotterdam-Antwerp) region also confirms this assessment—jet fuel stocks are being rapidly drawn down.
On the demand side, JPMorgan data shows global oil demand fell by an average of 2.8 million bpd in March, with the tracked decline widening to 4.3 million bpd in April and projected to further expand to about 5.5 million bpd in May. The International Energy Agency (IEA) had already coordinated a release of 400 million barrels from member states' strategic reserves in March, with the US Strategic Petroleum Reserve (SPR) providing nearly half of that supply supplement.
**Energy Giants Sound Alarms, Market Enters Countdown**
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 would "have to complete the price adjustment it has so far been able to avoid." Their base case forecasts Brent at $100 per barrel in Q3, falling to $90 in Q4, and reverting to $80 by 2027. However, if US and Chinese buffer reserves are exhausted, Brent could surge to $130-$150 per barrel in a worst-case scenario before "rescue reopening" arrives.
Saudi Aramco warned on Monday that if the Strait blockade continues for several more weeks, market rebalancing could extend into 2027, and "oil supply challenges" would persist. This echoes statements from US energy giants ExxonMobil and Chevron earlier this month—both reported lower quarterly profits, with executives highlighting market dislocation caused by the conflict.
Swissquote analyst Ipek Ozkardeskaya warned that if the Middle East war does not end quickly, the world, including G7 developed nations, "will start facing oil shortages."
JPMorgan analysts stated clearly in a recent report that one of the "core assumptions" of their framework is that accelerating inventory draws will ultimately force the Strait of Hormuz to reopen in some manner. However, they also cautioned that even if the conflict ends and tanker transit resumes, the market would still need weeks to return to normal flows, and a risk premium for potential renewed disruptions would persist.
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