Wall Street and traders jointly warned: The stalemate in the Strait of Hormuz is "depleting" global oil inventories.

As the conflict between the United States and Iran continues to drag on, global oil inventories are decreasing at a record pace. Wall Street analysts and energy traders warn that rapidly depleting inventories mean extreme price spikes and supply shortages are looming. According to Morgan Stanley estimates, between March 1 and April 25, global oil inventories have been declining at a rate of about 4.8 million barrels per day, forming a record-breaking peak. Crude oil inventories account for 60% of the decrease, with the rest being refined products. Goldman Sachs also stated that although there are signs that inventory declines may be slowing slightly, global visible oil inventories are approaching the lowest levels since 2018. Natasha Kaneva, head of global commodities research at JPMorgan Chase, emphasized that an energy crisis won't wait until inventories reach zero to happen, and the energy system itself also needs a certain level of inventory to operate. She warned that if the Strait of Hormuz cannot be reopened, oil inventories in OECD countries may reach "operational pressure levels" as early as next month, and further touch "operating minimums" in September. The term "operating minimum" refers to the global oil inventories reaching the minimum level required to maintain the normal operation of oil pipelines, storage tanks, and export terminals. As oil transportation in the Middle East is disrupted, oil inventories in the United States are also rapidly declining. Due to the surge in exports, U.S. crude oil inventories (including the Strategic Petroleum Reserve) have been decreasing for four consecutive weeks. Last weekend, U.S. distillate fuel inventories were at their lowest point since 2005, while gasoline inventories hovered around the lowest seasonal levels since 2014. Interestingly, in the previous joint oil reserve release action, the United States promised to release 172 million barrels of crude oil but only utilized 79.7 million barrels. If the U.S. completes the full release, reserves will be close to the lowest level since 1982. As inventories approach critical levels, analysts, traders, and oil company executives all warn that oil prices must rise to levels that will destroy more demand to restore market balance. Frederick Russell, head of research at Gunvor, said: "The place I am most worried about and where shortages will occur first is the gasoline market in Asia. Countries like Pakistan, Indonesia, or the Philippines may be the first to face bottoming out of oil tank stocks." Russell predicted that if the Strait of Hormuz remains closed until early June, some Asian countries may face macroeconomic impacts due to a diesel shortage, while Europe may have about a month of buffer time before the situation becomes difficult to address. This round of oil inventory crisis also presents a new characteristic: the countries that have made progress in the energy transition are less likely to be affected. According to the geographical analysis company Kayrros, since the conflict began, oil inventories in the Asia-Pacific region, excluding China, have been hit the hardest, with a decrease of around 70 million barrels. Japan and India have seen their inventories decrease by 50% and 10% respectively, reaching seasonal lows of at least the past decade. Kayrros also pointed out that China, with large-scale electrification of vehicles and truck fleets, still has strong crude oil inventories. In Europe, the focus of the problem is on aviation kerosene. According to terminal operation data provider Insights Global, independent oil storage inventories at the Amsterdam-Rotterdam-Antwerp (ARA) hub have decreased by one-third since the start of the war, dropping to a six-year low. Lars van Wageningen, research and consulting manager at Insights Global, interpreted: "Since February, we have seen a continuous decline in aviation kerosene inventories, and other regions such as Asia and Australia also need to procure this product, so everyone is competing to buy any available aviation kerosene." He further stated that although the supply is sufficient in the short term, summer demand may deplete inventories within five months, making the UK, Germany, and France the most vulnerable due to busy traffic and inadequate local production capacity. Looking ahead, the sharp reduction in global inventory levels also means that when the Strait of Hormuz reopens, the market will face additional pressure from various countries' governments and companies rushing to replenish their inventories. Willie Chiang, CEO of Plains All American Pipeline, said on Friday's earnings conference call: "We expect this destocking environment to continue over the next few months and eventually lead to replenishing on a longer-term basis. After the end of the Middle East war, if some countries replenish their strategic oil reserves to levels higher than before the war, we will not be surprised. This will actually create an additional layer of demand in the future."