Global oil inventories are being depleted at a record pace, presenting a stark contrast to the jubilant mood in equity markets, which are reaching new all-time highs.
According to Goldman Sachs data, since April, visible global oil inventories have been declining at an average rate of 6.3 million barrels per day. When including non-visible inventories, the depletion rate surges to 10.9 million barrels per day—the fastest monthly rate of drawdown since 2017. Since the onset of the Persian Gulf conflict, the estimated total consumption of oil products has reached 474 million barrels. With flows through the Strait of Hormuz remaining at only about 10% of normal levels, this trend is unlikely to reverse in the near term.
**Inventory Crisis: Record Drawdown Pace** Brent crude prices have remained unusually stable over the past week, largely holding within a high range around $90 per barrel.
Goldman Sachs analysis suggests this stability stems from a combination of three factors: a lower geopolitical risk premium, market participants destocking in anticipation of a potential reopening of the Strait of Hormuz, and a temporary weakening in spot purchasing demand. Together, these factors have suppressed prices, leading to declines in futures, spot, and refined product prices since the ceasefire—even though actual flows through Hormuz remain extremely low and global inventory draws remain severe.
The pressure is evident in the data. Since April, visible global oil inventories have fallen by an average of 6.3 million barrels per day. Including "non-visible" refined product inventories from non-OECD countries, Goldman estimates the total depletion rate for April reached 10.9 million barrels per day, the highest for any single month since 2017. Since the conflict began, the estimated total consumption of oil products has reached 474 million barrels.
Currently, Persian Gulf oil flows, including pipeline diversions, have fallen to 9.3 million barrels per day, just 40% of normal levels. Since the U.S. blockade began on April 12, this figure has decreased by approximately 2.6 million barrels per day. Iranian oil exports have plummeted to around 300,000 barrels per day.
Goldman Sachs anticipates that even if the Strait of Hormuz fully reopens, logistical bottlenecks related to restarting production, tanker transit times, and pipeline flow rates will mean the recovery will be gradual. Global inventory declines may continue into May or beyond.
Notably, there is a natural floor to inventory drawdowns. Once inventories hit operational minimums, and if supply cannot be restored, the only rebalancing mechanism will be demand destruction.
**Spot vs. Futures Divergence: Confusing Price Signals** The oil market's pricing structure is emitting conflicting signals. Extreme inventory draws imply that if the market perceives the supply disruption as short-lived, the price for immediate delivery should be significantly higher than future delivery prices, creating a deep backwardation in the futures curve. This is the core explanation for the apparent divergence between spot and futures prices recently.
Measured by the Exchange for Physicals (EFP) premium, the premium for converting Brent futures into physical delivery has not exceeded $2 per barrel over the past two months. However, the premium of spot Dated Brent over the front-month futures contract (the DFL spread), while having retreated from highs near $40 per barrel, remains elevated at approximately $10 per barrel.
Goldman Sachs believes the shift from panic stockpiling in March to active destocking in April is the primary reason for the recent stabilization in spot market prices. Reports indicate that some Asian refineries—particularly in China—have relisted previously purchased crude oil for resale. However, this destocking behavior is unsustainable. Once inventories hit their lower limit, the spot market will face a new, more violent price shock.
**U.S. Exports Hit Records, But Growth Nears Its Limit** The sole bright spot on the supply side comes from the United States. U.S. oil exports have surged to a record 12.7 million barrels per day, and outbound shipping data for May suggests exports could climb even higher.
However, several key pipelines in Texas are operating at or above capacity, indicating that there is very limited room for further growth in U.S. exports. The global cushion of oil on the water is also nearing depletion: non-sanctioned crude in transit is near historical lows; imports of Russian crude have fallen below their 2025 average; and U.S. waivers for importing Iranian crude in transit have expired without renewal.
Goldman Sachs warns that while baseline oil price forecasts face two-way risks, a longer-than-expected duration of the Hormuz blockade and more persistent Middle Eastern supply losses present significant net upward pressure. For investors ignoring oil market risks amid the prevailing stock market optimism, this may serve as a warning that is difficult to overlook for long.
Comments