EIA Warns Oil Inventories to Hit 23-Year Low
In its June Short-Term Energy Outlook, the agency stated it is operating under the assumption that the Strait of Hormuz will remain effectively closed in the near term, with any recovery in shipping volumes expected to be gradual and protracted over several months.
The EIA also warned that some oil production across the Middle East is expected to stay disrupted beyond the agency's short-term forecast window.
A Chokepoint That Moves the World
The Strait of Hormuz serves as the single most consequential energy transit corridor on the planet, channeling a dominant share of global crude oil and liquefied natural gas exports from Gulf producers to markets worldwide. Its near-total closure has already sent shockwaves through global supply chains.
With shipping traffic reduced to a trickle, Middle Eastern producers were forced to slash crude output by more than 11 million barrels per day in May alone compared with pre-conflict levels — a staggering contraction that has compelled the world to draw heavily on existing stockpiles to meet demand.
Inventories Heading for a 23-Year Low
The scale of those inventory draws is alarming. Global oil stocks are forecast to decline by an average of 6.3 million barrels per day in the second quarter of 2026, accelerating to 7.6 million barrels per day in the third quarter.
Most strikingly, the EIA forecast that oil inventories across OECD countries will fall to their lowest levels since 2003 — a sobering milestone that underscores the depth of the supply crisis now gripping global energy markets.
Demand Collapses, Then Rebounds
The crisis has also taken a heavy toll on consumption. The EIA slashed its global oil demand outlook, now projecting a contraction of 1.1 million barrels per day in 2026 relative to 2025, citing punishing fuel prices, constrained fuel availability, and government-led conservation measures. The reversal is stark: as recently as May, the agency had forecast demand growth of 0.2 million barrels per day for the year.
A recovery is anticipated in 2027, with demand projected to surge by 2.5 million barrels per day to reach 105.3 million barrels per day, as supply flows gradually normalize later in 2026.
Brent Crude: Volatile, But Pressured Lower
Despite the severity of the supply disruptions and thinning inventories, Brent crude prices actually declined in May, weighed down by weakening demand and market optimism surrounding reports of a potential diplomatic agreement between Washington and Tehran.
Nevertheless, the EIA expects Brent to average $105 per barrel through June and July, contingent on the Strait of Hormuz remaining largely shut to commercial shipping. As flows incrementally resume and producers begin restoring shut-in output, prices are projected to ease sharply, averaging $79 per barrel across 2027.
Legal Disclaimer:
EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.
