For the past few weeks, the energy market has been in the eye of the storm. The loss of about 14.4mn barrels a day of crude oil output from the Gulf countries in April due to the Strait of Hormuz closure has been partly offset by draining stockpiles and other temporary reliefs. Though parts of Africa and Asia have suffered shortages, in much of the developed world — beyond rising fuel prices and air fares — life has carried on much as normal. But a crunch point is approaching. The International Energy Agency warned last week that oil inventories are being depleted at a record pace. Further scarcities in poor countries and price jumps in rich ones loom within weeks. Governments, companies and consumers need to be ready.
Some reduction in consumption has eased the squeeze up to now — along with some supply boosts. More oil than usual was at sea when the Iran war began; Gulf producers had cranked up output sensing danger ahead. The release of a record 400mn barrels of strategic oil reserves announced by IEA countries in March, running at 2.3mn b/d since mid-April, has been a big help. The US has been exporting more crude and China importing less. And refineries have been using up stocks rather than buying more expensive oil.
But the IEA estimates the world has been consuming about 6mn b/d more crude than is being produced. Global oil stocks are still being drawn down at record pace, while some supply boosts are running out. The oil at sea outside Hormuz has now been delivered, and refinery stocks are dwindling.