IEA warns of ‘record’ oil drawdown after ‘unprecedented’ Strait of Hormuz supply shock
The West’s international energy watchdog warned that oil stockpiles were being drained at a record rate last month as the US’s war in Iran continues to choke supply in an “unprecedented” supply shock.
In a detailed report on the global market, the International Energy Agency revealed that around 4m barrels of oil a day were tapped from back-up supplies in April.
It said: “More than ten weeks after the war in the Middle East began, mounting supply losses from the Strait of Hormuz are depleting global oil inventories at a record pace … Observed global inventories, including oil on water, were drawn down by 250m barrels over March and April, or 4m barrels per day.”
The war has, in effect, closed the Strait of Hormuz thorough which tankers usually carry around a fifth of the world’s seaborne crude. The fragile ceasefire has not significantly boosted traffic.
‘Unprecedented supply shock’
The IEA labelled it “an unprecedented supply shock”, and put some stark numbers on the impact: “With Hormuz tanker traffic still restricted, cumulative supply losses from Gulf producers already exceed 1bn barrels with more than 14 mb/d of oil now shut in.
“Global oil supply declined by a further 1.8m b/d in April to 95.1m b/d, taking total losses since February to 12.8m b/d.”
It said that “the petrochemical and aviation sectors are currently most affected” and pointed to price spikes ahead, as well as a “plunge” in “refinery crude throughputs” by 4.5m b/d” in the second quarter
“A weaker economic environment and demand-saving measures will increasingly impact fuel use”, it added.
Exports reach ‘record levels’
But the Paris-based outfit also pointed to increased supply away from the world’s crude-producing heartlands:
“Producers outside of the Middle East also pushed output higher and lifted exports to record levels in response to the crisis. Indeed, 2026 supply growth expectations from the Americas have been revised up by more than 600 kb/d since the start of the year, to 1.5m b/d on average.”
And there was insight into the knock-on effects for another nation at war, in Ukraine rather than the Middle East: “Russia’s crude oil exports have also risen, as repeated attacks on its refineries have cut domestic use and led to higher shipments, while the United States temporarily waived sanctions on Russian oil on water.”
Overall, the IEA expects global oil demand to fall by 2.4m b/d year-on-year in the second quarter.
“For now, the steepest losses are seen in the petrochemical sector where feedstock availability is becoming increasingly constrained. Aviation activity is also running well below normal levels”.
