Global Oil Inventories Near Critical Levels
Global oil inventories are rapidly declining and approaching historically low levels, raising concerns about increased market volatility and possible supply disruptions, according to analysts at UBS.
The bank warned that tightening inventories could place additional pressure on global energy markets, especially as geopolitical tensions surrounding Iran and the Strait of Hormuz continue.
UBS Warns Oil Stocks Are Falling Fast
UBS economists, led by Arend Kaptyen, said global oil inventories stood at approximately 8.2 billion barrels at the end of February, placing them near the upper end of the historical range seen over the past decade.
However, inventories reportedly declined sharply to around 7.8 billion barrels by the end of April, bringing global stockpiles much closer to decade lows.
The bank now expects inventories to fall further toward roughly 7.6 billion barrels by the end of May, potentially reaching near-record low levels.
Demand Destruction Temporarily Delayed the Decline
UBS noted that the drop in inventories occurred slightly slower than initially expected due to several temporary factors that helped stabilize supply conditions.
These included weaker oil demand, releases from strategic petroleum reserves, and waivers allowing Iranian and Russian oil shipments to continue moving through global markets.
According to the bank, those supportive measures are now beginning to fade, with analysts warning that most supply buffers have largely been exhausted.
Inventory Pressure Could Spread to the United States
So far, the effects of supply shortages have been felt primarily in non-OECD economies, where real-time inventory tracking remains less reliable.
However, UBS believes the tightening supply environment is increasingly likely to impact developed economies as well, including the United States, where higher-frequency energy data provides a clearer picture of market conditions.
Oil Price Volatility Could Intensify
As global inventories continue shrinking, UBS warned that oil prices could become significantly more volatile in the months ahead.
The bank highlighted the growing risk of panic buying if physical supply disruptions worsen and the Strait of Hormuz remains closed for an extended period.
Such a scenario could further strain the global energy system and trigger sharp price swings across oil and fuel markets worldwide.
Iran May Benefit From Prolonged Market Pressure
UBS suggested that the ongoing supply squeeze may ultimately align with Iran’s broader geopolitical strategy.
The longer supply disruptions persist, the tighter global oil markets become, potentially increasing economic pressure on the administration of Donald Trump to negotiate an agreement that would reopen the Strait of Hormuz and stabilize global energy flows.
