Oil Markets Avoid Crisis But Thin Buffer Leaves Them Vulnerable

Global oil markets have narrowly avoided severe supply shortages despite disruptions to major export routes. Emergency stock releases, inventory drawdowns, and falling demand have kept supplies flowing so far.

The U.S.-Iran conflict has caused significant disruptions to oil exports through the Strait of Hormuz, which normally handles about 20 million barrels a day. The Bab el-Mandeb route has become crucial for Saudi exports, but any disruption there would add another risk to crude supplies.

Kazakhstan's production fell by more than half after drone attacks forced the temporary closure of its main export terminal on Russia's Black Sea coast. Chinese crude imports fell sharply during the crisis, from 12 million barrels a day before it started to around seven million barrels a day in June.