The International Energy Agency (IEA) has issued a stark warning about a record drawdown of global oil inventories following an unprecedented supply shock caused by the closure of the Strait of Hormuz amid the US-Iran war. In its latest monthly report, the Paris-based watchdog revealed that approximately 4 million barrels of oil per day were withdrawn from backup supplies in April, as the conflict continues to choke crude flows through the vital waterway.
Record Inventory Drawdown
According to the IEA, global oil inventories, including oil on water, fell by 250 million barrels over March and April, equivalent to 4 million barrels per day. The agency stated: "More than ten weeks after the war in the Middle East began, mounting supply losses from the Strait of Hormuz are depleting global oil inventories at a record pace." The strait, through which around one-fifth of the world's seaborne crude typically passes, has been effectively closed due to the conflict, with a fragile ceasefire doing little to restore tanker traffic.
Unprecedented Supply Shock
The IEA described the situation as "an unprecedented supply shock," highlighting that cumulative supply losses from Gulf producers have already exceeded 1 billion barrels, with more than 14 million barrels per day of oil now shut in. Global oil supply declined by a further 1.8 million barrels per day in April to 95.1 million barrels per day, bringing total losses since February to 12.8 million barrels per day. The agency noted that the petrochemical and aviation sectors are currently the most affected, with price spikes expected ahead. Refinery crude throughputs are projected to plunge by 4.5 million barrels per day in the second quarter, while a weaker economic environment and demand-saving measures will increasingly impact fuel use.
Exports Reach Record Levels
Despite the crisis, the IEA pointed to increased supply from producers outside the Middle East, who have pushed output higher and lifted exports to record levels. Supply growth expectations from the Americas have been revised up by more than 600,000 barrels per day since the start of the year, to an average of 1.5 million barrels per day. Additionally, Russia's crude oil exports have risen, as repeated attacks on its refineries have cut domestic use and led to higher shipments. The United States temporarily waived sanctions on Russian oil on water, further impacting global flows.
Demand Outlook
Overall, the IEA expects global oil demand to fall by 2.4 million barrels per day year-on-year in the second quarter. The steepest losses are seen in the petrochemical sector, where feedstock availability is becoming increasingly constrained. Aviation activity is also running well below normal levels, reflecting the broader economic impact of the supply shock.
