Institution: Iran's war is depleting global oil buffer inventories at an unprecedented rate

BlockBeats News, May 9 — As the Iran conflict disrupts oil transport in the Persian Gulf, global oil inventories are being drawn down at a record-breaking pace, eroding the buffer stocks that were originally meant to withstand supply shocks. The rapid contraction in inventories means the risk of even more extreme price surges and supply shortages is drawing ever closer.

As the Strait of Hormuz approaches near-closure for two months, governments and industries have fewer and fewer options to respond to the more-than-1 billion-barrel supply loss shock. The sharp depletion of inventories also means that even after the conflict ends, the market will remain susceptible to future supply disruptions for a longer period.

Morgan Stanley estimates that from March 1 to April 25, global oil inventories fell by an average of about 4.8 million barrels per day, far exceeding the prior peak for quarterly inventory declines compiled by the International Energy Agency. Nearly 60% of the reduction was in crude oil, with the remainder in refined products. The key point is that the oil system also needs to set a minimum inventory level.

Natasha Kaneva, head of global commodities research at J.P. Morgan, said this means that before inventories truly hit rock bottom, the portion of safety stock that can no longer be moved has already been reached.