- Global visible oil inventories shrank at a record 8.7 million barrels per day in May, nearly double the average pace since the Iran conflict began in late February, according to Goldman Sachs.
- The IEA has warned that oil markets will remain “severely undersupplied” through October even if the conflict ends immediately, with industry players saying Hormuz flows may not fully recover until 2027.
- About two-thirds of the May draws were driven by a collapse in oil-on-water shipments, with import declines spreading from Asia to Europe — jet-fuel flows into Europe are 60% below 2025 averages.
- Brent crude is trading near $106 per barrel — more than 70% higher year-to-date — though well below the war-era peak above $126, with the U.S. travel season beginning this weekend adding further demand pressure.
What Happened?
Goldman Sachs analysts including Yulia Zhestkova Grigsby and Daan Struyven published a note showing that global visible oil inventories — crude and products — have been draining at a record 8.7 million barrels per day so far in May, almost double the average pace since the Iran-war supply shock began. About two-thirds of the draws stem from a collapse in oil-on-water: fewer tankers are moving product because Iranian exports remain throttled to roughly 5% of normal through the Hormuz waterway, which faces a double blockade from both Iran and the U.S. The decline is spreading geographically: import slumps that began in Asia are now hitting Europe, with jet-fuel flows into the continent running 60% below 2025 averages. In China, refineries are displaying what Goldman calls “a lack of appetite” for crude, with local fuel sales down 22% last month.
Why It Matters?
The IEA has projected that even an immediate end to the conflict would leave oil markets severely undersupplied through October — a structural supply deficit that means high prices are not a near-term shock but a multi-month baseline. The U.S. Strategic Petroleum Reserve is being drawn down at a record 1.4 million barrels per day, some of which is being shipped directly overseas. American crude stocks hit their lowest level in nearly a year last week. With the U.S. summer travel season starting this weekend, domestic gasoline demand is about to add meaningful incremental pressure on a market that is already draining its buffers at an unprecedented rate. Pump prices above $4.55 per gallon nationally are already translating into political pressure on the Trump administration to secure a Hormuz deal.
What’s Next?
Brent near $106 remains the honest market signal on the probability of a near-term resolution. The SPR drawdown cannot continue indefinitely — at the current pace, the strategic buffer will be materially depleted well before October, removing the government’s primary price-management tool. If the conflict extends into the summer driving season without resolution, the path to $120 oil becomes more plausible, with gasoline prices that could test the political pain threshold heading into the midterm election cycle. Goldman’s note makes the stakes of the diplomatic track explicit: every week without a Hormuz deal is another week of record inventory draws that will take months to replenish even after flows normalize.
Source: Bloomberg
