NewDelhi: Crude oil markets are facing mounting concern as concerns intensify around the Strait of Hormuz. Reports from major financial institutions and energy agencies suggest that ongoing disruption in world’s one of the most important shipping routes for international energy supply is pushing international oil inventories lower. It is raising concerns about supply stability in the coming months.
The International Energy Agency (IAEA) has said in its latest monthly assessment that continued disruption through the chokepoint could push oil and fuel prices higher in the near future. The agency has also pointed to falling inventories and tightening supply conditions, saying that prolonged disruption could lead to more pronounced price movements across international energy markets.
Stocks falling, say reports
According to UBS, international oil inventories stood at a little over 8 billion barrels at the end of February. By the end of April, that figure had dropped to around 7.8 billion barrels. The bank has estimated that if demand trends continue, stocks could fall further to nearly 7.6 billion barrels by the end of May.
Financial major JPMorgan Chase has also flagged risks to international supply chains as inventories decline. The bank has estimated that only around 800 million barrels of stocks can be used without creating pressure on supply systems, as the remaining reserves are required to keep pipelines and storage infrastructure running smoothly.
JPMorgan’s international commodities head Natasha Kaneva has explained that the issue is not about running out of oil, but about maintaining enough available supply in the system to avoid disruption in distribution and logistics.
The bank has also warned that if the Strait of Hormuz continues to be closed until September, international oil inventories could fall to around 6.8 billion barrels, a level it describes as concerning for market stability.
Industry trends point to shrinking supply
During the company’s first quarter earnings call, Exxon Mobil Chief Executive Darren Woods said that commercial stocks, government strategic reserves and oil in transit helped absorb some of the supply shock in March and April.
However, he also said that if commercial inventories continue to fall while the Strait of Hormuz is disrupted, prices in the market could rise further.
His comments add to rising concern within the industry that temporary buffers may not be enough if supply disruption continues for a longer period.
Energy markets brace for tighter conditions
Rapidan Energy has also assessed that refined product inventories could reach critical levels by July or August if present conditions continue. The firm has warned that such a situation could affect international economic activity, especially sectors that depend heavily on transport fuel.
At the same time, analysts have pointed out that before reaching extreme shortage levels, rising fuel prices may begin to reduce demand on their own. Higher costs could slow consumption across transport and industrial sectors, easing constraints on inventories but adding strain to economic growth.
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