Mounting supply losses from the Strait of Hormuz are depleting global oil inventories at a record pace says the International Energy Agency in the May edition of its Oil Market Report.

The report states that cumulative supply losses from Gulf producers already exceed 1 billion barrels. Meanwhile, benchmark oil prices have posted wild swings from highs of $144/bbl to below $100/bbl in response to mixed signals around a potential end to the United States Iran conflict.

At the same time, stocks from commercial and government storage sites have continued to flow into markets to offset part of the losses. The storage drawdown drained 250 mb or 4 mb/d from global inventories over March and April.

In the same period, Saudi Arabia and the UAE have successfully redirected some exports to terminals loading outside of the Strait. Also, Atlantic Basin crude oil exports increased by 3.5 mb/d compared with February figures, with notable gains from the United States, Brazil, Canada, Kazakhstan and Venezuela. Russia’s crude oil exports also rose, as repeated attacks on its refineries cut domestic use and led to higher shipments, and the United States temporarily waived sanctions on Russian oil on water.

On the demand side, there is evidence of refiners reducing runs and sharply scaling back crude imports. Chinese seaborne crude imports fell by a massive 3.6 mb/d from February to April, and major reductions in imports were also seen in Japan (-1.9 mb/d), Korea (-1 mb/d) and India (-760 kb/d). The report notes, however, that while the slowdown in global refinery activity – by around 5 mb/d year-on-year in April – has temporarily eased tensions in the crude market, tightness is quickly spreading to product markets. For now, the steepest losses are seen in the petrochemical sector where feedstock availability is becoming increasingly constrained.

End users are also reducing consumption. Aviation activity is 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. Global oil demand is now expected to contract by 2.4 mb/d y-o-y in 2Q26 and to decline by 420 kb/d for the year as a whole, 1.3 mb/d weaker than IEA’s pre-conflict forecast. Higher prices, a deteriorating economic environment, and demand-saving measures will further weigh on global oil consumption.

IEA now expects global oil demand to contract by 2.4 mb/d y-o-y in 2Q26 and to decline by 420 kb/d for the year as a whole. Nevertheless, the oil market “will remain severely undersupplied through the end of the third quarter of 2026, even assuming the conflict ends by early June.”