Oil prices have fallen to prewar levels. Tanker traffic through the Strait of Hormuz is recovering fast. Gulf producers are already restarting idled wells.
But one thing will take much, much longer -- refilling the world's oil coffers.
Speed matters. The amount of oil in storage around the world is playing a central role in the U.S.-Iran power dynamics. The faster countries restock their buffers of crude, the weaker Iran's ability to threaten the world economy by holding the Strait of Hormuz hostage.
Vice President JD Vance explicitly connected oil storage and negotiating leverage last week. He said in an interview with media personality Michael Knowles that the U.S. signed a memorandum of understanding with Iran to allow the world to "refill some stocks and then to see where the hand is," referring to Tehran's position at the table.
Oil storage is a mix of commercially owned tanks that sit near refineries, ships kept laden at sea and government-run strategic reserves. Inventories in the Organization for Economic Cooperation and Development, a group of mostly wealthy countries, fell by 163 million barrels from March to May to their lowest level since December 1990.
Refilling global stocks is likely to take months if not years, longer than the 60 days stipulated in the MOU to settle thorny issues such as Iran's nuclear program.
Two factors that will help rebuild stocks faster: falling prices and a surprising glut of oil.
"The surge in oil supply is about to collide with a market that, at least for now, simply does not need it," said Natasha Kaneva, head of the global commodities strategy team at JPMorgan.
Some are predicting oil prices -- currently around $70 a barrel -- will fall even more in the months ahead, providing further relief to drivers and airlines. Analysts at Macquarie and Citigroup both forecast this past week that prices could sink to $60 in coming months.
Part of the reason for the projected price decline is that it will take time before strategic-reserve managers start buying again.
OECD nations are projected to begin refilling strategic reserves in the fourth quarter of this year, with the U.S. starting its own replenishment in 2027, first at only 100,000 barrels a day and then ramping up to about 170,000 barrels a day in the second half of the year, said JPMorgan's Kaneva.
The turn of events -- from a market that nearly went into a dangerous supply shock into one that is amply supplied -- is "an almost comical development four months into Hormuz's closure," said Rory Johnston, founder of oil research firm Commodity Context.
Tanker traffic out of the Strait of Hormuz has entered a new normal of around 30 to 60 a day. That is less than before the war, but enough to relieve pressure in global markets.
Ship tracker Vortexa estimated around 140 million barrels of crude oil left in June -- an average of about 4.7 million barrels a day, up from just two million a day in May. The crude exodus accelerated in early July to about 40% of prewar levels, according to Vortexa.
On Sunday, the Organization of the Petroleum Exporting Countries and its allies agreed to raise oil output by 188,000 barrels a day in August, the fifth straight monthly increase. With shipping traffic through the strait recovering and Gulf producers restoring production, the cartel's announcements of output increases are less symbolic than a few months ago.
The United Arab Emirates, which left OPEC in May after years of chafing under production quotas, has been one of the quickest Gulf producers to dial exports back up.
It is using a bypass pipeline from Abu Dhabi to Fujairah outside the strait, plus it is taking advantage of ships streaming out of the Gulf.
Kuwait has recovered production volumes faster than expected. Its export loadings rose to around 1.6 million barrels a day last week, compared with prewar levels of around 2.4 million barrels a day, Johnston said. Saudi Arabia, meanwhile, has kept sending oil via a bypass route to the Red Sea in addition to its tankers now exiting the Gulf.
Ample supply and low prices should spur companies and governments to rebuild stocks -- eventually.
Crude levels in the U.S. Strategic Petroleum Reserve -- which was created in 1975 after the Arab oil embargo and sits in salt caverns on the Gulf Coast -- are still falling, and in the week ended June 26 hit their lowest level since 1983, according to the U.S. Energy Information Administration.
Replenishing the SPR back to prewar levels will take 15 to 18 months at a rate of 200,000 barrels a day, said Hamad Hussain, commodities economist at London-based research firm Capital Economics. And that is an optimistic rate of buying.
After the Ukraine war sparked an oil price shock in 2022, the U.S. did not start replenishing its SPR until mid-2023. It then added to the SPR at roughly 75,000 barrels a day for 30 months until the war with Iran started. By then, inventories were still significantly lower than they had been before 2022.
"Washington did not rebuild the SPR after the previous drawdown cycle, and with focus on keeping prices low, it has little incentive to bid aggressively for barrels to refill it now," said Rahul Choudhary, an oil and gas research analyst at Rystad Energy.
In China, the government drew down barrels from its massive oil reserves -- which analysts estimate to be between one billion and 1.4 billion barrels -- to cushion the Gulf supply shock.
But China doesn't appear to be in a rush to refill. Vortexa data shows that China imported just six million barrels of crude a day via sea in June, roughly four million barrels a day fewer than it averaged in 2025.
Not everyone thinks the current calm will last. The oil price is reacting to the idea that the "hostilities have largely finished for good," said Neil Crosby of market-intelligence company Sparta Commodities. "I and many doubt that this outcome is real and lasting," he said. But for now, it is hard to bet the other way until conflict flares up again.
Write to Rebecca Feng at rebecca.feng@wsj.com and Georgi Kantchev at georgi.kantchev@wsj.com
(END) Dow Jones Newswires
July 05, 2026 09:54 ET (13:54 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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