Oil inventories are falling around the world at a record pace and will continue to drop for months as the disruption to West Asia supplies from the Iran war intensifies, according to the International Energy Agency.
Global observed oil inventories declined at a rate of about 4 million barrels a day in March and April, according to a monthly report from the agency, which is co-ordinating the release of emergency fuel stocks by major economies like the US, Japan and Germany. The market will remain "severely undersupplied" until October even if the conflict ends next month, it said.
Oil largely held its 8% surge over the past three sessions. Brent crude traded above $107 a barrel, paring most of its retreat earlier on Wednesday, after the IEA's statement.
The hit to exports is deepening as the conflict continues to effectively shutter the Strait of Hormuz, which connects the Persian Gulf to international markets. Global supplies slumped by a further 1.8 million barrels a day last month, taking total losses since February to 12.8 million barrels a day, according to the report. "Even if there is a solution to the conflict, we do think it will take time-weeks and months-to resume flows through the Strait of Hormuz to a normal pace," Toril Bosoni, head of the IEA's oil markets and industry division, said in an interview. "The longer the disruptions remain in place, and the faster inventories decline, we are going to see increased pressure on prices."
Also read: Three crude oil tankers exit Strait of Hormuz with trackers switched off, data shows
The crisis is also taking a deeper toll on demand, prompting the agency to slash projections for a third month since the conflict began. World oil consumption is set to plunge by 2.45 million barrels a day this quarter, the steepest drop since the 2020 Covid pandemic, as product flows are cut off and prices soar.
There are some signs that the inventory drawdown may have slowed slightly in recent days, according to Goldman Sachs Group , which pointed to weaker demand from China.
