Countries are drawing down oil inventories and strategic reserves at an unprecedented rate due to supply disruptions caused by the ongoing Middle East war, according to the International Energy Agency (IEA). Global oil stocks fell by 117 million barrels in April, following a 129-million-barrel drawdown in March after the U.S. and Israeli attacks on Iran. The IEA warned that rapidly shrinking inventories may lead to future price spikes, particularly as the summer travel season approaches in the northern hemisphere.
OPEC Reduces Production
OPEC and its allies (OPEC+) have cut oil production by more than 30%, or 9.7 million barrels per day (mb/d), since the war began. In April, OPEC’s crude oil production dropped by 1.73 mb/d to 18.98 mb/d, while OPEC+ production fell by 1.74 mb/d to 33.19 mb/d. The group also lowered its 2026 demand growth forecast from 1.38 mb/d to 1.17 mb/d due to slowed demand from higher energy prices.
Strait of Hormuz Closure Impact
Iran’s blockade of the Strait of Hormuz has effectively halted Gulf oil and gas exports, forcing nations to seek alternative supplies. The IEA has released 400 million barrels from emergency stocks, with around 164 million barrels already drawn. Airlines have warned of potential jet fuel shortages within weeks if disruptions persist. The IEA expects global demand to shrink by 2.4 mb/d in the second quarter, down from a previous forecast of 3.5 mb/d.
Market Volatility and Future Outlook
Oil prices have surged, with Brent futures trading near $107 per barrel and U.S. crude above $101 per barrel. The IEA predicts further demand destruction, forecasting a contraction of 420,000 barrels per day by the end of 2026. Morgan Stanley estimates the market will lose another billion barrels in 2026 due to the time required to restart oilfields and repair infrastructure.
OPEC+ Response and UAE Exit
Despite the crisis, OPEC+ agreed to a symbolic production quota increase of 188,000 barrels per day for June. The United Arab Emirates (UAE) recently withdrew from OPEC, distancing itself from Saudi Arabia’s leadership. The UAE’s exit, effective May 1, marks a notable blow to the alliance, as it was OPEC’s third-largest producer last month.
Long-Term Implications
The IEA and industry experts, including Saudi Aramco CEO Amin Nasser and IEA chief Fatih Birol, have described the current disruption as the largest in oil market history. The combination of supply losses, inventory depletion, and economic uncertainty is expected to keep oil prices volatile in the coming months.