MW The world lost nearly 1 billion barrels in oil supply over the past 75 days. Why investors aren't worrying enough.
By Myra P. Saefong
The oil market is likely to shift to a supply deficit from last year's surplus, IEA says
The world has lost about 12.8 million barrels of oil a day since the Iran war began at the end of February, according to the International Energy Agency.
Global oil prices have already shot up nearly 50% since the Iran war started, but they should be higher still, given the estimated loss of almost 1 billion barrels of oil over the past 75 days.
That's the view from Brian Kessens, senior portfolio manager at Tortoise Capital, who pointed to the effective closure of the Strait of Hormuz and the lack of clear visibility around when normal flows through the key waterway might resume.
Oil prices have already moved meaningfully higher, but the market still appears to be "discounting a relatively quick solution," he said.
This comes as the global oil market is expected to shift into a supply deficit this year from a surplus in 2025, according to a new estimate from the International Energy Agency.
Without a supply fix, Brent crude prices could push back up to $125 a barrel pretty quickly, experts said, which could start weighing on the U.S. economy.
So far, global oil prices, based on the nearest delivery month, haven't surpassed the settlement high of $127.98 a barrel from March 2022, the year Russia invaded Ukraine. They're also far from reaching the $146.08 record-high settlement from July 2008, according to Dow Jones Market Data.
Global benchmark Brent crude on Wednesday saw its July contract (BRNN26), the nearest delivery, settle at $105.63 a barrel, down 2% for the session. Prices are nearly 46% higher since the start of the Iran war at the end of February.
Yet the IEA estimates the global oil market has already lost a total of 12.8 million barrels per day, according to a monthly report released Wednesday. About 75 days into the war, that amounts to a loss of 960 million barrels.
Read: Why the oil crisis could become a full-blown catastrophe within a month
What has been happening is that oil demand has been weakening in response to higher prices, inflation pressure and economic disruption, said Kessens at Tortoise Capital. The supply loss, however, is still much larger than the demand adjustment currently forecast.
Here's a closer look at the relevant numbers: The IEA has forecast a drop in global oil demand this year, to 104 million barrels per day. World oil supply is expected to drop this year to 102.2 million barrels per day, the IEA report showed - and that's only assuming that flows through the Strait of Hormuz gradually resume starting in June.
Those numbers suggest that supplies won't be able to meet demand, leading to a supply deficit of 1.8 million barrels per day. For the full year, that would mean the world would see a supply deficit of 657 million barrels.
Furthermore, the Persian Gulf conflict doesn't look likely to end soon. Faltering diplomatic efforts to restart shipping through the Strait of Hormuz mean the U.S. will continue its efforts to try to force a resolution, which would lead to more retaliation from Iran, "escalating and prolonging the energy disruption and shock to the global economy," said Matt Gertken, chief geopolitical and U.S. political strategist at BCA Research.
The likelihood of that suggests Brent oil prices should shoot well above the technical resistance level of $120 a barrel and move toward $150 or higher, Gertken told MarketWatch. That would lead to more economic declines and tighter financial conditions, he said.
Current supply losses have been offset by the lifting of some sanctions on crude and by the IEA's release of emergency oil reserves, said Michael Lynch, president at energy-market consulting firm Strategic Energy & Economic Research.
But both those actions are "finite," and as the supplies are drawn down, markets will get "increasingly worried," he said. Demand destruction - whether through conservation or rationing - is "better than nothing, but not very much" to offset those inventory declines.
Many links in the global industrial-supply chain are already being tested - such as lubricants, as well as sulfuric acid, helium and aluminum - because of the disruptions in the Persian Gulf, Lynch said. This makes it seem that, at the very least, a mild recession will be triggered, he said.
When June comes around, Lynch said it's a possibility that U.S. gasoline prices will head toward $5 a gallon at the pump, with crude above $125 a barrel by mid-month. The national average price of a gallon of gasoline is currently nearly $4.53, according to GasBuddy.
Read: Record oil exports could drive U.S. diesel and gas supply shortages just as summer travel starts
The longer the strait is closed, the higher prices will go, Lynch said. The question is whether price increases accelerate as inventory sources dwindle.
-Myra P. Saefong
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(END) Dow Jones Newswires
May 13, 2026 16:59 ET (20:59 GMT)
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