Global oil stockpiles could sink to critically disruptive levels soon, sparking more shortages

By Isabel Wang

After the Strait of Hormuz reopens, a full recovery to prewar levels may take about four months, J.P. Morgan says

Global oil stockpiles are shrinking toward levels that could soon disrupt the energy markets.

Oil stockpiles in developed economies around the world could fall in the coming months to levels that J.P. Morgan analysts say may disrupt the smooth functioning of energy markets, raising the risk of reduced liquidity and bottlenecks in crude flows.

Total commercial oil inventories in Organization for Economic Co-operation and Development countries are hovering above 1,050 million barrels, but a continued disruption of oil supply due to gatekeeping in the Strait of Hormuz could soon see them hit the "operational minimum" - a threshold where normal market operations could start to break down, according to J.P. Morgan Commodities Research (see chart below).

SOURCE: JPMORGAN COMMODITIES RESEARCH, IEA, S&P GLOBAL PLATTS, WOODMACKENZIE

A prolonged closure of the Strait of Hormuz would likely result in an oil shortfall of 14 million barrels per day, forcing energy markets around the world to draw down inventories and curb demand to bridge the gap.

"The latter is already evident across Asia - particularly in middle distillates and jet - while the former is unfolding more quietly, masked by timing lags, floating storage dynamics and the uneven regional distribution of stocks," said analysts led by Natasha Kaneva, head of the global commodities strategy team at J.P. Morgan (JPM).

Against that backdrop, Kaneva and her team expect OECD commercial crude inventories to fall by roughly 166 million barrels in April and by a further 67 million barrels in early May before hitting the "operational minimum" of 842 million barrels, they wrote in a Thursday client note.

The oil market was well-supplied before the Iran conflict, with the International Energy Agency estimating that global supply could exceed demand by nearly 4 million barrels per day in 2026, a record annual surplus. However, those inventories have been "steadily drawn down" over the past month, suggesting that stockpiles can only provide a limited buffer to oil supply, the J.P. Morgan team said.

Ever since the U.S. and Israel started the war, the IEA had been anticipating global oil supply to be slashed by 8 million barrels a day in March, or almost 250 million barrels in total. It also decided to release an unprecedented 400 million barrels from emergency reserves.

Hostilities in Iran have entered a second month and show no clear signs of a de-escalation. President Donald Trump on Wednesday, in an address to the nation, touted the U.S. military's successes and said American forces will continue to hit Iran "very hard" in the next two or three weeks. The president has made repeated threats against Iran's energy infrastructure if the country does not loosen its stranglehold on the strait.

But even if a ceasefire is reached or the strait reopens, it would still take months for the oil market to return to full-supply conditions.

See: When the Strait of Hormuz fully reopens, this will be crucial to global oil markets

"Reopening the Strait would set off a rapid but uneven normalization, with financial prices adjusting far faster than physical flows," Kaneva said. "Markets would price not only the resumption of transit, but also a full return to normal supply conditions - something that, inpractice, will take months to materialize."

OECD commercial inventories should start to rebuild about two months after the strait reopens, though a full recovery to prewar levels may take about four months, according to J.P. Morgan.

June Brent crude (BRN00) (BRNM26) was up 7.8% to end at $109.03 on Thursday afternoon. The global benchmark has risen for seven straight weeks, logging its longest winning streak since 2023.

U.S. benchmark West Texas Intermediate crude for May delivery (CLK26) (CL.1) rose 11.4% to $111.54 a barrel on Thursday, settling at the highest level since June 28, 2022, according to Dow Jones Market Data.

Energy markets will be closed on Friday for the Good Friday holiday.

-Isabel Wang

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04-02-26 1635ET