LONDON – Global oil stockpiles are plummeting and inventories may not recover until December 2027, strategists warn, with physical shortages potentially looming over Europe by the end of this month.
Jeff Currie, executive co-chairman at Abaxx Commodity Exchange, said that physical shortages could hit Europe “any day now,” and the severity of the ongoing supply crunch is not yet reflected in oil prices or policymakers’ remarks.
Speaking with CNBC’s “Squawk Box Europe” Monday, Currie said that oil supply concerns will intensify as inventories are depleted, adding that once the shortages hit, prices will go “non-linear.”
“Then we find out what the willingness is of somebody to pay for that last molecule,” Currie said.
Currie said the oil market is currently in the midst of its “shoulder months” — traditionally the weakest part of the commodity demand cycle throughout the year, coming out of the heating season and heading into the driving season.
But, with the U.S. Memorial Day and U.K.’s spring bank holidays approaching, demand for diesel, gasoline and oil will rise sharply. “That’s when you’re going to begin to feel it,” Currie said.
‘Veneer of stability’
Societe Generale analysts led by Mike Haigh, head of FIC and commodity research, said oil markets are operating under a “veneer of stability” — but the underlying system remains “acutely stressed.”
“Inventories are falling quickly, and critically, only a small share of global stocks is truly usable without pushing the system into operational stress,” analysts said in a note Monday.
Flows through the Strait of Hormuz — which typically make up about a fifth of the world’s total oil and gas supply — have been severely constrained since the U.S.-Iran conflict began on Feb. 28.
SocGen analysts said that even if the Strait were to reopen by early June, the complex physical supply chain sequence of getting more oil online — involving tanker transit, discharge, refining and distribution — still means a delay of at least 52 days.
Brent crude.
That lag means several million barrels per day remain offline, leading to further draws on rapidly depleting inventories.
‘Prolonged stress’
A late June reopening, meanwhile, would bring “deeper and more prolonged stress”, with physical relief pushed back into late August and meaningful normalization not expected until September, according to SocGen.
But an even lengthier delay to reopening could see oil prices pushed toward $150 per barrel and staying elevated for the rest of the year.
“Even as flows resume, the delayed timing embeds a deeper inventory deficit, prolonging tightness into 2027 and pushing full normalization further out, highlighting how sensitive the system is to even small shifts in reopening timing,” analysts explained.
Oil prices ticked higher on Monday afternoon, as negotiations between Washington and Tehran appeared to be at a standstill.
Brent crude, the international benchmark, rose 1.4% on Monday, hitting $110.73 a barrel, while the price of U.S West Texas Intermediate futures reached $106.86, a 1.3% increase.
“Anybody who gets their hands dirty in this business is telling you this is bad,” Currie said. “The Iranians want to inflict pain. It’s not the price of oil that matters here — it’s the availability of oil.”
