The world is depleting its oil inventories at a record pace: IEA
Friday, 15 May 2026
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.
That’s according to the International Energy Agency (IEA), which keeps a stocktake on world oil stocks - much like MBIE reports on New Zealand’s fuel stocks - and issues a report each month.
April’s report found global oil inventories drew down by 117 million barrels - after depleting by 129 million barrels in March - and on-land stocks in OECD countries plummeted by 146 million barrels in April.
A fall in global oil production was squeezing from the other side - output dropped by 1.8 million barrels a day from pre-Iran war times, bringing production down to 95.1 million barrels a day. Before the war against Iran, global production of oil ranged between 103 and 108 or so million barrels of oil each day.
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Output from Gulf countries has slumped, down a billion barrels of oil since the war began and with 14 million barrels “shut in” in the Strait of Hormuz in what the IEA calls “an unprecedented supply shock”.
Crucially for New Zealand, refiners upon which this country rely have reduced runs and sharply scaled back crude imports. Korea is taking in one million barrels a day less into its refineries, for example, and is where New Zealand gets the bulk of its refined fuels (petrol, diesel and aviation fuel).
While the slowdown in global refinery activity has temporarily eased tensions in the crude market, tightness is quickly spreading to product markets.
Buffer
There was a buffer or oversupply of oil going into the conflict, which has helped absorb some of the sudden supply losses.
And two other factors are helping ease the supply crunch. High oil prices are both stimulating new drilling outside the war zone, and softening consumer demand.
As to the first, “Dated Brent”, which represents immediate, real-world oil trading (as opposed to Brent futures), saw a surge in prices to an average of US$120.36 per barrel. Today, Dated Brent has pulled back and is trading at US$106.11 a barrel, given hopes of a resolution to the war.
These high oil prices are both signalling to oil producers outside the affected zone to ramp up their drilling. Indeed, there are 600,000 barrels a day more drilled in the US and 3.5 million barrels a day more from the Atlantic Basin extracted since the war started, and more drilling also in Brazil, Canada, Kazakhstan and Venezuela.
Russia’s crude oil exports have also risen, as repeated attacks on its refineries have cut domestic use and led to higher shipments, while the United States temporarily waived sanctions on Russian oil on water.
While the price of crude has risen, the cost of refined fuel has risen even faster, which is why consumers are paying so much at the pump. “cracks” or the profit margin on “middle distillates” - diesel, jet fuel and heating oil - are at record highs.
Demand
Meanwhile, demand is softening slightly as consumers and businesses are having to cut back on fuel use given the price hikes.
World oil demand is forecast to contract by 420,000 barrels per day year-on-year in 2026, with the biggest decline in the second quarter of 2026 - currently - where it is down by 2.45 million barrels a day, most of that lowered demand coming from non-OECD countries.
Notwithstanding that refineries are making record profits, they are also seeing a drop in demand as prices become unsustainable. For now, 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, helping to ease some of the pressure on jet fuel prices, which nearly tripled after Middle Eastern exports were cut off.
“Higher prices, a deteriorating economic environment and demand-saving measures will further weigh on global oil consumption,” the IEA said.
“While demand may swing back to growth towards the end of the year if a deal to end the war is agreed that allows flows through the Strait of Hormuz to gradually resume from [the third quarter of this year], as is assumed in this Report, supply will likely be slower to recover.
“As a result, the oil market remains in deficit [losing supply] until the final quarter of the year.”