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More than ten weeks into the war in the Middle East, global oil inventories are being depleted at a record pace as disruptions to flows through the Strait of Hormuz continue to tighten supplies, the International Energy Agency (IEA) said on Wednesday.
According to preliminary IEA data, global oil stockpiles fell by 129 million barrels in March and by a further 117 million barrels in April following US and Israeli strikes on Iran and the subsequent disruption to Gulf exports.
The sharpest declines were recorded in OECD countries, where on-land inventories dropped by 146 million barrels. Visible stocks in non-OECD economies fell by 24 million barrels.
The agency said cumulative crude supply losses from Gulf producers have now exceeded one billion barrels, with more than 14 million barrels a day unable to leave the region, describing the situation as an “unprecedented supply shock”.
The International Energy Agency said in March it would release 400 million barrels from members’ emergency reserves to support global markets, with around 164 million barrels already drawn.
Oil markets have swung sharply amid uncertainty over diplomatic efforts between the United States and Iran to reopen the Strait and end the conflict.
The price of North Sea Dated crude, a benchmark for physical deliveries in the near-term, dropped from a peak of $144 per barrel to below $100 before climbing back again.
At the same time, oil producers have moved to cushion the impact on global markets. Saudi Arabia and the United Arab Emirates have rerouted some exports through terminals outside the Strait, while producers in the Atlantic Basin, including the US, have increased shipments to Asia.
Russian exports have also increased after repeated attacks on domestic refineries reduced local demand, while temporary US sanctions waivers allowed more Russian cargoes onto world markets.
Lower demand, more price volatility
At the same time, weaker economic activity and high fuel prices are weighing on consumption. As end users are reducing consumption, refiners have also reduced runs and sharply scaled back crude imports.
The IEA now expects global oil demand to fall by 420,000 barrels a day in 2026 to 104 million barrels per day. This is a downward revision of 1.3 million barrels per day compared with what the agency expected before the Iran war.
The agency said the petrochemical and aviation sectors had been hardest hit, while higher prices and demand-saving measures were expected to further curb fuel use in the months ahead.
The IEA said demand could begin to recover later in the year if an agreement is reached to gradually restore flows through the Strait of Hormuz from the third quarter onwards.
However, supply is expected to recover more slowly, leaving the market in deficit until the final quarter of the year.
In its outlook, the agency forecasted that while demand may swing back to growth towards the end of the year if a deal to end the war is agreed that allows flows through the Strait of Hormuz to gradually resume from 3Q26, as is assumed in this report, supply will likely be slower to recover.
“With global oil inventories already drawing at a record clip, further price volatility appears likely ahead of the peak summer demand period,” said the IEA.
