Global Oil Reserves Drop at Record Pace as U.S. Digs Into Larder To Boost Supply

Global oil storage levels are dropping at a record pace as the blockage of the Strait of Hormuz constrains supplies, and inventories may not recover for months after the end of the Iran war.The independent International Energy Agency, which works with governments to coordinate disruptions in fuel supplies, says global oil inventories declined more than 250 million barrels during March and April. That’s around four million barrels per day.The world is experiencing “an unprecedented supply shock,” the agency reported in its monthly analysis released on Wednesday.“This is obviously accelerating as the disruptions of flows through the Strait of Hormuz remain restricted,” the agency’s head of oil industry and markets, Toril Bosoni, told Bloomberg Television. Worldwide oil production declined by a further 1.8 million barrels a day in April, taking cumulative losses since February to 12.8 million barrels a day. The worldwide supply now sits at 95.1 million barrels a day.“It becomes a problem when refiners are cutting back, having to cut back,” Ms. Bosoni said. “Refinery runs and disruptions to crude supplies are translating into lower supplies of products and we have to cut back demand. So, we’re getting there as the disruptions continue.”The petrochemical sector is one of most affected by the squeezed supply while feedstock availability is also becoming constrained. The agency says aviation activity is running well below normal levels, with jet fuel prices nearly tripling since Middle Eastern exports were cut off.Ms. Bosoni said oil prices have faced “unprecedented volatility” since the start of the war and “the longer the disruptions stay in place, and the faster that inventories decline, we’re going to see increased pressure on prices, certainly.”Global oil consumption is weakening, however, due to higher prices, a deteriorating economic environment, and supply conservation measures. This will help slow the draw of inventories.The energy agency has been working with member nations to release a record 400 million barrels of oil from their reserves in an effort to stabilize supplies. The Trump administration promised to supply 172 million of those barrels as part of the March agreement. Energy Secretary Chris Wright said the process will take approximately 120 days to deliver all of the oil, based on planned discharge rates.The Department of Energy awarded contracts on Monday to distribute more than 53 million barrels of that promised oil. That is on top of 80 million barrels that were previously awarded.The releases from the strategic reserves are only expected to bring temporary supply relief while the distribution will bring the total American reserves down to less than half the reserve’s total capacity.While demand may swing back to growth toward the end of the year if a deal is reached to end the war, supply will likely be slower to recover, according to the report. It warns that further price volatility is expected due to the peak summer demand period.“We’re already seeing uneven draws in inventory across countries,” Ms. Bosoni said. “We’re seeing global crude stocks falling. We’re seeing it both in the United States and gasoline stocks.”Ms. Bosoni said after the conflict is resolved, it will take “weeks and months” for the oil supply chain to get back to normal levels, including the time to bring oil workers back to the Gulf region to ramp up production.

Global Oil Reserves Drop at Record Pace as U.S. Digs Into Larder To Boost Supply

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