Oil stocks drain at record pace as Iran war chokes global supply

"The International Energy Agency has warned of an "unprecedented supply shock" following the effective closure of the Strait of Hormuz, the narrow shipping lane that until recently carried roughly a fifth of the world's oil and gas. The destruction of energy infrastructure across the Gulf has compounded the damage, leaving traders, hauliers and manufacturers scrambling to absorb costs that were unthinkable only six months ago."

"The Paris-based agency now expects a shortfall of around 1.8 million barrels a day to materialise this year, a dramatic reversal of the 410,000-barrel surplus it had forecast as recently as last month. The shift has come even as the economic damage of the conflict pulls demand sharply lower."

""With global oil inventories already drawing at a record clip, further price volatility appears likely ahead of the peak summer demand period," the IEA cautioned. Global supply is forecast to fall by an average 3.9 million barrels a day this year to 102.2 million, on the assumption that tanker traffic through the strait gradually resumes from the end of June."

"Markets have whipsawed since hostilities between the United States and Iran erupted, with Brent crude, the international benchmark, surging to as high as $126 a barrel from just $60 at the start of the year. On Wednesday evening Brent snapped a three-day winning streak, sliding 2 per cent to $105.63 in its sharpest one-day retreat in a week. Even so, the benchmark is up 73.6 per cent year-to-date."

Global oil stockpiles are declining at the fastest pace ever recorded as conflict in the Middle East drives an unprecedented supply shock. The effective closure of the Strait of Hormuz has reduced a shipping lane that previously carried about a fifth of global oil and gas. Damage to energy infrastructure across the Gulf has intensified shortages and forced traders, hauliers, and manufacturers to absorb rapidly rising costs. The International Energy Agency expects a shortfall of about 1.8 million barrels per day this year, reversing a prior forecast of a surplus. Inventories are already drawing at a record rate, and further price volatility is expected ahead of peak summer demand. Supply is forecast to fall by an average 3.9 million barrels per day to 102.2 million, with the market remaining in deficit until the final quarter.

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