Global oil inventories are being depleted at a pace the market can no longer ignore. Multiple top-tier Wall Street institutions have issued warnings that if the blockade of the Strait of Hormuz persists into June, the energy market could rapidly shift from superficial calm to a structural crisis. A supply disaster in specific regions may arrive sooner than most anticipate.
Peace negotiations remain stalled, with oil futures continuing to trade above $100 per barrel. The U.S. April CPI rose 3.8% year-on-year, nearing a three-year high, putting pressure on stock markets. Morgan Stanley cautioned this week that the oil market is at a critical juncture, "racing against time." If Brent crude is forced to "complete the price adjustment it has so far avoided," it could surge to $130-$150 per barrel in a worst-case scenario.
A recent Goldman Sachs report highlights 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 being the first affected. 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 global total oil inventories (encompassing commercial and strategic reserves, onshore and floating storage, crude and refined products) equate to approximately 101 days of global demand. This is down 4 days from the 105 days estimated at the end of February. At the current depletion rate of about 3 days of inventory per month, the figure is projected to fall further to 98 days by the end of May.
This number appears to remain above two key thresholds: the EU's minimum emergency reserve requirement of 61 days for member states, and the estimated minimum operational onshore inventory for the global oil system of roughly 30 to 40 days.
However, there are significant discrepancies in the assessment figures among Wall Street institutions. Morgan Stanley estimates global commercial and strategic crude oil stocks at 5.75 billion barrels, Societe Generale at approximately 7.8 billion barrels, and JPMorgan at around 8.2 billion barrels. All three figures, which combine official and private data, are below the peak level of about 9 billion barrels seen 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 across regions and product types, with the largest declines occurring in the parts of the market with the least visibility."
He notes 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 flows through the Strait of Hormuz begin to recover soon, global visible oil product inventories could hit their lowest level since 2018, as any full normalization of deliveries would still take several weeks.
**Refined Products: The Fastest-Depleting, Highest-Risk Segment** The Goldman Sachs report clearly states that among all inventory categories, onshore commercial refined product stocks represent the fastest-depleting, least visible, and most risk-concentrated segment.
Goldman estimates that global commercial refined product inventories have rapidly declined from 50 days of demand pre-conflict to the current 45 days. Within this, non-OECD refined product stocks plunged from 49 days to 43 days, a 10% drop, marking the most severe depletion. OECD refined product stocks fell from 40 days to 38 days, a decline of about 5%. In contrast, global onshore commercial crude oil inventories have remained largely flat at around 39 days, providing some buffer for countries with refining capacity.
Goldman Sachs projects 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 from 2000-2005 before the shale revolution. Notably, China and Singapore are among the few regions where refined product inventories have increased, primarily due to both regions cutting product exports.
**Asia-Pacific: 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 by 11 million barrels per day year-on-year, causing the region's total imports to drop by over 40%.
In response, the situations for refined products and crude oil in the Asia-Pacific have diverged significantly.
For refined products, by cutting exports, the region compensated for about 70% of the shortfall in Persian Gulf imports, with net imports declining by only about 700,000 barrels per day. For crude oil, alternative suppliers could fill less than 40% of the gap, leading to a year-on-year drop of 7 million barrels per day in the region's net crude imports in April. This directly constrains domestic refining capacity and refined product supply.
Goldman Sachs believes that, considering each country's own crude inventory levels, South Africa and India face the highest risk of refined product shortages. Judging by the geographic 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 Alarm Could Sound by June** The most immediate threat facing Europe is jet fuel.
In a joint analysis with European energy and transportation equity analysts, Goldman Sachs estimates that under assumptions including a normalization of Persian Gulf export flows before the end of June, a 3% decline in jet fuel demand, and a 50% import substitution rate, European commercial jet fuel inventories (excluding government emergency reserves) could fall below the International Energy Agency's (IEA) critical shortage threshold of 23 days in June.
The UK is considered the European country 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 these are 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 region (Amsterdam-Rotterdam-Antwerp) also supports this assessment, showing 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 barrels per day in March, with the tracked decline widening to 4.3 million barrels per day in April, and is projected to expand further to about 5.5 million barrels per day in May. The IEA previously coordinated a release of 400 million barrels from member countries' strategic reserves in March, with the U.S. Strategic Petroleum Reserve (SPR) providing nearly half of that supply boost.
**Energy Giants Sound Alarms as Market Enters Countdown** According to Bloomberg, a team led by Morgan Stanley strategist Martijn Rats warned in a Monday report that if the blockade lasts into late June or July, Brent crude will "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 returning to $80 by 2027. However, if U.S. and Chinese buffer reserves are depleted, Brent could surge to $130-$150 per barrel in a worst-case scenario before "reopening relief" arrives.
Saudi Aramco warned on Monday that if the Strait blockade persists for several more weeks, market rebalancing could extend into 2027, and "oil supply challenges" would persist. This echoes statements earlier this month from U.S. energy giants Exxon Mobil and Chevron, both of which reported lower quarterly profits, with executives highlighting market dislocation caused by the conflict.
Swissquote analyst Ipek Ozkardeskaya warned that if the Middle East conflict does not end swiftly, the world, including G7 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 drawdowns will eventually force the Strait of Hormuz to reopen in some manner. However, they also noted that even if the conflict ends and tankers resume transit, it would take weeks for normal flows to resume, and a risk premium for potential renewed disruptions would persist.
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