Analysis: Global Oil Reset to Drag After Hormuz Reopen

VIENNA (DTN) – Middle East oil production and exports will likely take weeks, if not months, to approach pre-war levels once traffic through the Strait of Hormuz flows unobstructed again, meaning inventories are likely to be drawn down for a large part of 2026.

Consumers are likely to continue pulling barrels from storage long past an eventual reopening of the Strait of Hormuz, where 20 million bpd, accounting for a fifth of global supply, used to transit prior to the U.S.-Israeli airstrikes against Iran that began in late February.

The number of available empty crude oil tankers in the region is at less than half of typical levels, capping how quickly exports can return. In addition, export terminals and moorings that sustained damage from counter attacks by Iranian drones and missiles will need repairing. It will take several weeks before the first barrel arrives at an Asian refinery once flows are restored.

Logistical constraints aside, regional oil production will take months to approach antebellum levels. Some oil wells have been idle since the start of the war, and many will require deep maintenance before their output can approach pre-war levels. The same is true for pipelines, rigs and processing plants damaged during the war.

Global oil and fuel inventories have dwindled precipitously over the past two months as commercial and strategic stocks drew down rapidly to compensate for the crisis on Hormuz. Member countries of the International Energy Agency (IEA) agreed to coordinated releases of crude oil from their strategic reserves amid an askew supply-demand balance that the Paris-based energy watchdog dubbed the “largest oil supply disruption in history”.

The IEA estimates that oil inventories outside of the Middle East have depleted at a rate of 6.6 million bpd in March while stockpiles in the region grew by 3.8 million bpd amid a lack of outlets. The pace of global stockpile draws has likely sped up in April amid limited open storage capacity within the region. The recent U.S. blockade of Iranian maritime trade may also accelerate stock depletions, cutting off the only oil stream still flowing since the closure of the waterway, amounting to another 1.5 million bpd.

Goldman Sachs said this week that global oil inventories have fallen to an eight-year low by the end of April, covering about 101 days of demand, and warned they could drop to 98 days of cover by the end of May. Commercial refined product stocks have dwindled from 50 days of demand before the Iran war to now 45 days.

Prior to the war, oil stocks surged as OPEC+ started to return curtailed output from April 2025, leading to surplus given that the growth in non-OPEC production alone was close to that of global demand. Total oil inventories started the year at a five-year high and were expected to rapidly expand as supply was set to outpace demand growth.

U.S. Fills the Gap

Refiners and consumers have increasingly turned to the U.S. to fill the current gap. U.S. Energy Information Administration data showed that total petroleum exports have over the past month dwarfed previous record highs on the back of a resurgence in crude exports and refined product exports sustaining an unprecedented break-neck pace.

International demand for U.S. petroleum is unlikely to recede anytime soon, meaning inventories are set for a steeper than usual draw season. Crude oil stocks typically peak in February and March amid deep refinery maintenance before dropping continuously until troughing after the end of the main fuel demand season in September. Gasoline inventories tend to follow a similar seasonal pattern dictated by driving demand.

Continued high exports just as domestic demand is resurging could lead inventories below the near-record lows seen in 2023, lifting retail fuel prices from already elevated levels. According to EIA data, nationwide gasoline stocks have dropped to 219.8 million bbl in the week ending May 1, down 2.6% year-on-year and 2.5% below the five-year average. Distillate fuel oil inventories, meanwhile, have plummeted to a 20-year seasonal low and were at 102.3 million bbl trailing year-ago levels by 4.1% and the five-year average by 9.9%.