Oil Market Avoids Disaster But Safety Net Dwindles

The global oil market has dodged severe supply shortages despite disruptions to key routes, but its safety net is now alarmingly thin. Emergency stock releases and inventory drawdowns have kept supplies flowing, but this cushion is rapidly depleting.

According to the International Energy Agency (IEA), countries are required to maintain stocks equivalent to at least 90 days' net imports. However, in the early days of the US-Iran conflict, roughly 400 million barrels were made available from OECD emergency reserves.

The US Strategic Petroleum Reserve has dropped to its lowest level since March 1983, with only 311.4 million barrels remaining. Market analyst Mick Strautmann warned that the large strategic stock releases have meaningfully depleted the buffer available for any future disruption.

Despite this, IEA head Fatih Birol claims there is still plenty of oil in OECD storage for further releases if necessary. However, with supplies through the Strait of Hormuz severely restricted and the Bab el-Mandeb route becoming crucial to Saudi exports, the market may not be able to withstand another major disruption.