Oil Stocks Face Crunch as US-Iran Conflict Drags On

As the US-Iran conflict drags on, oil traders and policymakers are facing a critical question: can global oil stocks withstand another six months of supply disruptions?

According to Reuters calculations, Saudi Aramco believes that the world has lost 2.6 billion barrels of oil since the start of the war, making it the largest supply disruption ever in cumulative terms apart from the 1979 Iranian revolution.

This amounts to a massive 25 days of global consumption based on pre-war global oil demand of 103 million barrels per day. However, China has cut its demand in recent months, reducing the world's consumption.

The International Energy Agency (IEA) announced a release of 400 million barrels from emergency reserves in March and says that the global economy still has substantial stocks. The IEA's stocks consist of government-held stocks and commercial stocks, standing at 1.5 billion barrels and enough to cover the current estimated supply gap of 5 million bpd for 300 days.

However, this includes only government-held stocks, which are enough to cover the supply gap for 180 days. The IEA cannot order the release of commercial stocks, such as those held by refiners for operational reasons.