Oil Market Faces Billion-Barrel Deficit Amid Strait Crisis, Reserves Struggle to Compensate

Estimated losses in the oil market reached 800 million barrels in March-April, growing to 1 billion barrels by mid-May, according to the IEA. This compares to a cumulative intervention of 400 million barrels, including the US. Before the conflict, global observable reserves in February stood at 8,185 million barrels; however, a significant portion is operational, transit, or technological stock essential for refineries, production, and logistics.

The estimated daily supply gap is 13-14 million barrels per day (b/d), though the current demand-supply imbalance is smaller due to a pre-crisis surplus and ongoing market adjustments. Saudi Arabia and the UAE have successfully rerouted some exports away from Strait of Hormuz terminals. Crude oil exports from the Atlantic basin, now largely supplying former Middle Eastern oil consumers, increased by 3.5 million b/d since February, with notable growth from the US, Brazil, Canada, Kazakhstan, and Venezuela.

OPEC countries reduced production by 9.64 million b/d: Saudi Arabia cut by 3.42 million b/d (to 6.98 million b/d), Iraq by 3.22 million b/d (to 1.35 million b/d), Kuwait by 1.97 million b/d (to 0.57 million b/d), and the UAE by 1.2 million b/d (to 2.44 million b/d). Other OPEC members, collectively producing 8.8 million b/d, slightly increased production by about 0.15 million b/d, largely due to Venezuela’s 0.16 million b/d rise to 1.02 million b/d. Iran’s production remained stable near pre-war levels (3.51 million b/d in April vs. 3.68 million b/d in February). The expanded OPEC+ group, producing 14 million b/d collectively, increased output by 0.41 million b/d, entirely driven by Kazakhstan (+0.43 million b/d over two months) and Russia (+0.16 million b/d to 8.83 million b/d). Overall, OPEC+ reduced production by 9.24 million b/d, from 43.37 million b/d to 34.13 million b/d. An estimated minimum of 171 million barrels of oil accumulated in tankers in the Persian Gulf, alongside 262 million barrels in « fast » reserves—storage available for immediate extraction. Roughly 430-440 million barrels could enter the market as soon as the Strait reopens. Seaborne crude imports to China fell by 3.6 million b/d from February to April. Significant import reductions were also seen in Japan (-1.9 million b/d), Korea (-1 million b/d), and India (-760,000 b/d).

Consumers are also cutting consumption; world oil demand is projected to decrease by 2.4 million b/d year-on-year in Q2 2026 and by 420,000 b/d for the full year. The petrochemical and aviation sectors have been hit hardest. Refining activity is expected to drop sharply: crude throughput is forecast to decrease by 4.5 million b/d in Q2 2026 to 78.7 million b/d, and by 1.6 million b/d for the entire year 2026 to 82.3 million b/d. Product shortages are as critical as crude shortages due to the imbalance in global refining capacity, concentrated in the Middle East; even if crude from the Persian Gulf is freed quickly, its transformation into refined products like jet fuel is constrained.

If the Strait of Hormuz remains closed, the market will balance not through stockpiles but through a forced decline in demand.