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Dire warnings about oil supplies are coming from everywhere lately as the Strait of Hormuz remains largely closed while President Donald Trump\u2019s trip to China failed to produce a breakthrough to reopen the critical waterway.<\/p>\n
While investors have been trading on hopes that the Iran ceasefire will remain intact, there is little sign that the oil trade will return to normal soon, forcing them to reckon with the reality of worsening shortages and an imminent tipping point ahead.<\/p>\n
JPMorgan predicted that commercial oil inventories in the developed world could \u201capproach operational stress levels\u201d by early June. Saudi Aramco said global inventories of gasoline and jet fuel could reach \u201ccritically low levels\u201d ahead of the summer. <\/p>\n
The International Energy Agency warned the world is drawing down oil inventories at a record pace, with 164 million barrels released by governments and industry as of May 8.<\/p>\n
\u201cRapidly shrinking buffers amid continued disruptions may herald future price spikes ahead,\u201d IEA said in its lately monthly report.<\/p>\n
The U.S. and Israel launched their war on Iran two and a half months ago, and analysts expected the Strait of Hormuz to reopen by the end of May or early June. <\/p>\n
That\u2019s looking less likely as Iran attacks ships in the Persian Gulf while the U.S. military is still enforcing a blockade on Iranian oil. Meanwhile, the Navy\u2019s efforts to reopen the strait with warships is on hold. <\/p>\n
An F-35B Lighting II, attached to Marine Fighter Attack Squadron (VMFA) 121, takes off from the flight deck of America-class amphibious assault ship USS Tripoli (LHA 7), May 13, 2026. <\/p>\n
U.S. Navy<\/p>\n
\u201cBut\u00a0if the Strait remains effectively closed and commercial oil inventories in the OECD continue to be run down at the same pace as they were in April, oil stocks could reach critically low levels by the end of June,\u201d Hamad Hussain, climate and commodities economist at Capital Economics, said in a note on Wednesday. <\/p>\n
\u201cThat would be consistent with Brent crude prices reaching an all-time nominal peak, and could require more disorderly and economically damaging cuts to oil demand.\u201d<\/p>\n
He estimated oil prices could top $130-$140 a barrel next month if the strait remains closed and inventory depletion rates remain steady.<\/p>\n
On Friday, Brent crude futures gained more than 3% to close at $109.26 a barrel as China offered no hints that it would lean on ally Iran to normalize tanker traffic.<\/p>\n
For now, oil futures haven\u2019t reached doomsday levels. That\u2019s due to ample supplies at sea when the war started, record releases from strategic oil reserves, and a sharp drop in Chinese oil imports as it draws on its own stockpiles, according to Hussain.<\/p>\n
More supplies from oil inventories could be released. But they cannot fall to zero as certain volumes are needed to maintain pressure within storage systems, and the daily flow of releases is limited. <\/p>\n
In addition, 1 billion barrels of oil is estimated to have been lost already, dwarfing the IEA\u2019s planned total release of 400 million barrels.<\/p>\n
Efforts to clamp down on oil demand could intensify, and some countries in Asia have already imposed rationing measures.<\/p>\n
\u201cBut given the extent of supply losses from the Middle East, the risk of a \u2018non-linear\u2019 adjustment in demand and prices will continue to grow for as long as the Strait of Hormuz remains effectively closed,\u201d Hussain added.<\/p>\n
In other words, rather than oil prices following a straight-line trajectory higher, they could instead go parabolic, looking more like the curved end of a hockey stick.<\/p>\n
Similarly, analysts at UBS also said oil inventories are approaching record lows, warning that \u201cbuffers have now largely been exhausted.\u201d<\/p>\n
As stockpiles go even lower, UBS said oil prices could become more volatile and highlighted the \u201crisk of panic buying if physical dislocation intensifies and the Strait of Hormuz remains closed.\u201d<\/p>\n
#Oil #markets #face #moment #truth #June #Brace #nonlinear #price #spikeand #panic #buying<\/p>\n","protected":false},"excerpt":{"rendered":"
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