FT: Stockpiles of crude decline by nearly 200 million barrels

Global oil reserves fell at an unprecedented rate in April, underscoring mounting pressure on energy markets as conflict in the Middle East disrupts supply and heightens the risk of further price increases ahead of the summer travel season.

Stockpiles of crude declined by nearly 200 million barrels, or about 6.6 million barrels per day, according to estimates from S&P Global. The sharp drawdown came despite a simultaneous drop in demand of roughly 5 million barrels per day — the steepest contraction outside of the COVID-19 pandemic, Financial Times reports. 

“This is massive, it is far above the usual range,” said Jim Burkhard, head of crude research at S&P. “An inevitable market reckoning is coming,” he added.

In a typical month, global oil inventories fluctuate by only a few hundred thousand to one million barrels, highlighting the scale of April’s decline.

Burkhard said the market has lost around 1 billion barrels of crude since the start of the Iran-related conflict, with falling demand still being “outstripped by the loss of supply.” He warned: “Higher crude oil prices are still to come.”

Prices have surged since late February, as tensions involving Iran and the United States disrupted traffic through the Strait of Hormuz — a critical artery for global oil shipments — while strikes have also damaged energy infrastructure across the region.

Market participants caution that prices could rise significantly further once global inventories fall below critical thresholds, with some analysts suggesting such a tipping point may be only weeks away.

On May 5, benchmark Brent crude settled about 4% lower at just under $110 per barrel, as a ceasefire between the United States and Iran held despite renewed attacks a day earlier.

The S&P data covers oil held by governments and companies, as well as crude stored aboard tankers at sea. It also reflects releases from the U.S. Strategic Petroleum Reserve in response to the crisis.

Although global oil reserves total around 4 billion barrels, a significant portion is tied up in operational use — such as maintaining refinery activity and pipeline pressure — limiting the volume that can be quickly deployed.

According to Goldman Sachs, global oil stocks are nearing their lowest level in eight years, with only about 45 days’ supply of refined products such as gasoline, diesel and jet fuel remaining worldwide. The bank highlighted particularly steep declines in Asia and Africa.

“The speed of depletion and supply losses in some regions and products is concerning,” Goldman Sachs researchers said.

Regional data also points to tightening conditions. In northern Europe, jet fuel inventories dropped to a six-year low in April, according to pricing agency Argus Media. In the United States, gasoline stocks are projected to reach record lows during the peak summer driving season.

Despite average fuel prices nearing $4.50 per gallon, U.S. demand remains resilient. Morgan Stanley estimates that one in every 11 barrels of oil is consumed by American motorists and forecasts that U.S. inventories could fall below 200 million barrels by the end of August — roughly equivalent to one week of demand.

Still, Burkhard noted that the United States has yet to experience the full impact of the crisis, with crude inventories remaining higher than at the same point last year. He added that most of the recent global stock declines have been concentrated in Asia.

A sharper drop in U.S. reserves could trigger broader market alarm, he warned.

 “The worst of the crisis is ahead of us,” Burkhard said.

By Sabina Mammadli