OECD Oil Inventories Plummet Toward Historic Lows Amid Iran War Disruptions

The US Energy Information Administration (EIA) has warned that oil inventories are headed toward multi-decade lows. According to the EIA, total oil inventories in the members of the Organization for Economic Cooperation and Development (OECD) will fall to just under 2.3 billion barrels by December.

This is due to the loss of output from the Iran war, which has resulted in a record pace of inventory drawdowns. The EIA notes that marine traffic through the Strait of Hormuz, a critical waterway that handles 20% of global oil shipments, is unlikely to return to pre-conflict levels until early 2027.

The rapid inventory drawdown creates a foundation for a sharp increase in oil prices in the months ahead. The EIA predicts that prices for global benchmark Brent crude oil will average around $105 a barrel in June and July in the spot market, significantly higher than the current futures price of $91.60 per barrel.