Global oil inventories are fast approaching their lowest level in a decade, a development that analysts in London say now threatens not merely higher prices but outright physical shortages in vulnerable regions. According to UBS, even after accounting for the coordinated release of strategic reserves, stocks are set to fall to 7.6 billion barrels by late May — a threshold last seen in 2016. The bottleneck at the Strait of Hormuz, where tanker traffic has slowed to a trickle, compounds the pressure on a system already stretched by sustained production losses across the Middle East.

Viewed from the Gulf, the numbers are stark. Energy consultancy Kepler estimates that cumulative losses of crude oil and condensate from the region have reached 782 million barrels since disruptions began, with the figure expected to exceed one billion barrels by the end of this month. Most producers are now operating at levels dictated by domestic demand and tight export capacity, effectively transforming what began as a transit crisis into a structural supply deficit. Roughly 12.5 million barrels per day of output remains offline or constrained — more than 12 percent of global consumption.

In Washington, the response has been a steady drawdown of emergency stockpiles. Commercial crude inventories fell by 4.3 million barrels in the week ending 8 May, the Energy Information Administration reported, leaving total holdings at 452.9 million barrels. Strategic reserves, meanwhile, have been tapped to the point where they now sit at their lowest level since October 2024, reflecting the Biden administration’s calculation that immediate supply security outweighs the long-term cost of refilling the buffer. The demand spike fuelled by the Iran conflict has accelerated this depletion.

Yet a curious question lingers: why has Brent crude not already breached $200 a barrel, as some feared in March when Iran threatened precisely that scenario? The answer, analysts in the Gulf point out, lies in a constellation of countervailing forces — strategic releases, rising non-OPEC output, and the gradual destruction of demand as high prices bite. Brent peaked at $138 in early April and the EIA now expects it to hover near $106 this month. But the risk of localised scarcity, rather than a sustained price spike, is the more insidious threat: if stocks continue to shrink, the next shock may not be a number on a screen but the sudden, grinding halt of refineries in import-dependent economies.