oil inventories – With Iran disrupting transit through the Strait of Hormuz and physical oil deadlines tightening, experts warn the global market is approaching operational minimums—where prices could jump fast if flows don’t resume soon.
For a while, oil markets found a way to hold their nerves. Prices stayed clustered around $100 per barrel even as the Strait of Hormuz remained effectively closed—despite the damage that closure has done to supply lines.
But the cushion is thinning fast. and experts say the world is running out of options that can be used at the speed the market now demands. The Strait of Hormuz disruption began shortly after the US and Israel launched an airstrike campaign in late February. and it has already stripped about 1 billion barrels of oil from the global market. according to IEA data.
The reroute effort is real. Oil can still be moved around the waterway through pipelines running through Saudi Arabia and the UAE. Yet the market continues to lose an additional 14 million barrels a day while the strait is closed. according to JPMorgan data. Even so, investors have kept prices contained, betting that diplomacy will eventually produce resuming flows.
Rebecca Babin. a senior energy trader at CIBC Private Wealth. described the logic in plain terms: “The market is taking very seriously that the diplomatic process is going to be the eventual outcome. and that flows are going to resume.” She added. “We’re pricing flows that we hope will be coming in a month. but we haven’t really seen that uptick yet.”.
What those investors are leaning on is disappearing inventory.
Commercial inventories of both crude oil and refined products—petroleum. gasoline. diesel. and jet fuel—have plummeted globally as stocks have been expended with no backfill. To patch those immediate losses. the IEA coordinated the release of 400 million barrels of oil from member countries’ strategic reserves early in the war. and governments and private-sector companies around the world have steadily drawn down inventories.
But strategic reserves and business inventories are not limitless. Experts say there are hard limits to how low inventories can fall before the global oil system hits operational minimums—limits made sharper by the Strait of Hormuz closure.
Even storing oil has constraints. Storage tanks with floating roofs—used for most onshore capacity—must be at least 20% full to operate. according to Goldman Sachs research. Pipelines must have oil along their entire length to maintain operations. Refineries can’t fall much below 65% of their capacity without operationally degrading and losing money.
And even if the strait’s closure ended tomorrow, Goldman Sachs strategists warn that the oil market is likely to reach the lowest global storage levels on record since 2018, when satellite data largely became available to track global stocks.
Babin warned of a specific timing pressure: “If no flows start resuming by the end of June. we will be hitting those inventory levels that flash red lights where we’re kind of tipping into that inflection point where operations may be impacted.” She said. “So this month that we’re looking at here is extremely critical in terms of the market thinking that those flows will resume and we will avoid that outcome.“.
In other words, this isn’t just a paper trade anymore—it’s a physical system reaching its boundaries.
As the risk of hitting those floors grows. prices could swing upward quickly if the market has to price for the reality of lower inventories. Exxon Mobil senior vice president Neil Chapman said at a Bernstein conference on Thursday that if inventory levels hit operational minimums. prices are likely to rise fast. He said Brent crude—whose earlier high of $118.35 per barrel marked a near-four-year high during the war—could reach upward of $150 or $160 per barrel before demand destruction brings prices back down.
Chapman described the stakes in terms of how unusual low inventories are getting: “We’re approaching unheard-of inventory levels — I mean. really. really low levels.” He added. “You can debate whether that’s going to hit those really low levels in two weeks or three weeks … Once you get to the minimum inventory levels and all-time low inventory levels. there’s only one way to go.”.
Still, the market has not reached its worst-case scenario yet. Before 2026. the oil market was projected to be massively oversupplied—at a surplus of anywhere from 2 million barrels per day to more than 4 million per day. Goldman Sachs strategists had estimated international Brent and US WTI crude contracts would trade between $50 and $60 per barrel.
Some of those cushions have helped slow the slide into panic. China, which spent 2025 buying oil volumes far above domestic demand, has been drawing down stocks and reducing refinery operations. In Southeast Asia, governments have instituted fuel rationing programs and shortened work and school weeks. In the US. weekly crude oil exports reached an all-time high of more than 14.17 million barrels per day in the week ended April 24.
But Jeff Currie—co-chair of Abaxx Markets and prior co-head of commodities at Goldman Sachs—argued that those measures only go so far. He said, “Strategic stocks are meant to be the last line of defense, not the first, but this time Washington spent them first, managing headlines, not risk.”
When inventory is already at the edge, Currie said the market can’t be fooled with optimism: “When you have no crude in storage, then and only then will the spot price move to a level to destroy demand.” He added, “You cannot print molecules.”
That phrase lands because the situation has been moving through physical chokepoints, not just on trading screens. Even if a potential temporary US-Iran deal—reported by Axios on Thursday—is publicly confirmed and commercial traffic resumes through the Strait of Hormuz. strategists say normalization would likely take months.
Ship owners have to trust safe passage, and several hundred vessels would need to make their way out of the strait for weeks-long journeys to their end markets. At the same time, tens of millions of barrels’ worth of production shut down across the Gulf region would have to be brought back online.
Falling inventories don’t automatically trigger a rapid US shale response either. While US exports are increasing, futures prices haven’t increased enough to trigger widespread growth in production from the US shale industry, according to Jefferies analysts Lloyd Byrne and Sam Burwell.
For now. that is why futures prices have remained contained. and why investors haven’t yet fully priced the “flash red lights” scenario. Babin said the market is interpreting the headlines as a promise that inventories will stop drawing down: “The market is seeing these headlines and saying. ‘Okay. I feel comfortable that we’re going to avoid that very significant red line for inventory draws. ’” she said. “But it’s just yet to be determined.”.
In the background, time keeps counting toward that end-of-June test—when the market will have to decide whether it was right to bet on diplomacy, or whether the world’s dwindling oil stockpiles are about to turn a waiting game into a fast, expensive scramble.
Strait of Hormuz oil prices inventories IEA CIBC Brent crude Exxon Mobil diplomatic process storage capacity