Oil inventories crash amid historic supply shock

Global oil markets are facing what analysts describe as the worst supply disruption in history, with rapidly falling inventories and worsening geopolitical tensions pushing crude prices higher and raising fears of renewed inflationary pressures across economies already struggling with weak growth.

Barclays on Friday warned that risks to oil prices are now “firmly skewed higher” despite maintaining its forecast for Brent crude to average $100 per barrel in 2026, as the prolonged disruption in the Strait of Hormuz continues to drain global stockpiles.

The investment bank said global inventory trends are signalling a supply deficit of between six million and eight million barrels per day (bpd), with US inventories nearing their lowest levels since 2020.

“Inventory trends are signalling a 6-8 million bpd deficit with the U.S. inventories within reach of the lowest levels since 2020,” Barclays analysts said in a market note.

According to the bank, even if tanker traffic through Hormuz resumes immediately, inventories would still remain roughly 20 million barrels below already tight historical levels.

“The starting point for inventories, in the most optimistic scenario, would still be about 20 million barrels below the tightest level they have been recently,” the bank added.

The warning comes as oil prices resumed their upward climb in Asian trading on Friday, with Brent crude rising above $105 per barrel while West Texas Intermediate traded close to $99 per barrel amid growing doubts over a diplomatic breakthrough in the Middle East.

The Strait of Hormuz, through which about one-fifth of global oil and liquefied natural gas supplies pass daily, has remained severely disrupted for weeks following escalating tensions in the Gulf region.

Analysts said the disruption has intensified fears of a prolonged global supply crunch at a time when inventories were already thin.

Goldman Sachs has also raised alarm over the pace of stock depletion, warning that global inventories are falling at an accelerated rate.

The bank said inventory draws in April occurred at double the pace recorded in March, while withdrawals since early May have averaged 8.7 million bpd, the highest level ever recorded.

“Physical markets continue to tighten, as estimated oil exports through the strait remain at a very low 5 percent of normal,” Goldman Sachs analysts said.

Earlier this month, the bank warned that global inventories were approaching an eight-year low, leaving the market highly vulnerable to further shocks.

The growing supply concerns are reviving memories of previous oil crises that triggered global inflation surges and economic slowdowns.

Nigeria, Africa’s largest oil producer, has struggled to fully benefit from previous oil rallies due to declining crude production, pipeline vandalism, underinvestment and rising petrol import costs.

Although the removal of petrol subsidies has reduced direct government exposure to rising fuel prices, analysts say higher crude prices could still worsen inflationary pressures and increase business operating costs.

According to a Bloomberg Intelligence survey, asset managers and energy market experts expect oil prices to average between $81 and $100 per barrel over the next 12 months as markets continue to price in a persistent geopolitical risk premium.

Analysts said the longer the disruption lasts, the more difficult it will become for consuming nations to stabilise prices without coordinated emergency releases from strategic reserves.

“The longer this lasts, the bigger and stickier the price shock,” Barclays said.