Global oil buffers hit critical lows as Hormuz deadlock persists

Exxon Mobil senior vice president Neil Chapman recently cautioned that current inventory levels are reaching unprecedented lows. Once these buffers are fully depleted, market forces will likely trigger a rapid price surge. According to data from the Energy Information Administration, U.S. crude stocks including the Strategic Petroleum Reserve dropped to 791 million barrels by May 29, marking an eight-week decline and the lowest levels since early 2024.

Toril Bosoni of the International Energy Agency noted that these critical stock draws coincide with the onset of peak summer fuel demand. While coordinated releases from strategic reserves and a decline in Chinese imports have mitigated the initial impact of the conflict, analysts at JPMorgan suggest that prices will likely appreciate sharply unless tanker traffic through the strait normalizes. Mehmet Beceren of Rosenberg Research pointed to late June as a potential tipping point where supply constraints will force either higher consumer costs or significant demand destruction.

Beyond immediate price hikes, the conflict has embedded a permanent risk premium into energy markets. Joseph Tanious of Northern Trust Asset Management argues that the Strait of Hormuz is now a structural chokepoint, rendering a return to pre-war prices below $70 unlikely. While the U.S. remains relatively insulated due to domestic production, economists warn that sustained energy inflation could slow economic growth and dampen consumer sentiment, which is already hovering at historic lows.