IEA warns of ‘record’ oil drawdown after ‘unprecedented’ Strait of Hormuz supply shock
The West’s international energy watchdog has 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.
The International Energy Agency revealed that around 4m barrels of oil a day were tapped from back-up supplies in April, within a detailed report on the global market.
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 through which tankers usually carry around a fifth of the world’s seaborne crude. The fragile ceasefire has not significantly boosted traffic.
The IEA labelled it “an unprecedented supply shock”, in words that chimed with fears of a looming fuel supply crunch, including of jet fuel into the peak summer holiday travel season.
The 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.”
‘Unprecedented supply shock’
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.
Then came an update from OPEC, the representative body of oil exporting nations.
It cut its 2026 forecast for global oil demand growth to 1.2m b/d in its latest Monthly Oil Market report, trimmed from 1.4m b/d in the previous edition.
It described the revised rise as “healthy”, but it reflected overall cuts to demand forecasts for the second, third and fourth quarters of the year.
OPEC said oil market traders trimmed their bets on a higher oil price, as “net long positions declined over April, mainly in ICE Brent”, the main international crude benchmark. It cited “profit-taking from previously accumulated long positions” amid “mixed geopolitical signals and potential de-escalation” in the Gulf.
Nonetheless OPEC said: “Hedge funds and other money managers maintained a broadly bullish stance on the crude oil market” in the month.
During April, Brent Crude peaked at around $140 a barrel, depending on the exactitudes of the contracts concerned. Crude for physical delivery in the month crossed above $141, at the height of the tensions, while the shortest-term futures contracts hit $138 a barrel.
On Wednesday, Brent was at $107.43, down on the day by about 0.3 per cent.
Crude over $100 and beyond has stoked a wave of concern about an inflation shock, caused by higher energy prices rippling through the global economy.
The IEA said: “A weaker economic environment and demand-saving measures will increasingly impact fuel use”.
Russian oil exports rise
But the Paris-based outfit also pointed to increased supply away from the world’s crude-producing heartlands.
It said: “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 a national also 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,” the agency said.
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”.