How much oil-market buffer is left?
9 hours ago
- Since February 2026, the US/Israel-Iran war has disrupted global oil supply, with the Strait of Hormuz and Red Sea effectively closed, cutting about 20% of supply.
- The US Strategic Petroleum Reserve (SPR) has fallen to 285.4 million barrels, its lowest since 1982, and is being drawn down at varying rates.
- Oil prices have surged: Brent crude +40%, US diesel +68%, US gasoline +54% compared to pre-crisis levels.
- Global oil production has fallen short of demand, with the IEA estimating a supply loss of 5.7 million barrels per day and global stocks drawn down by 400 million barrels year-to-date.
- Three scenarios are modeled: corridor holds (10% odds), standoff (40%), and corridor lapses (50%), with different withdrawal rates and price assumptions.
- Refinery capacity is stretched globally; US refineries operate above 95% utilization, while Russian refineries have lost over 30% capacity due to strikes.
- Russia has imposed export bans on diesel and jet fuel, with deadlines in September and November 2026, worsening supply constraints.
- Economic impacts include rising inflation (US CPI 3.4%), potential recession (15-50% probability), and the Federal Reserve likely to raise interest rates.
- Higher energy costs are expected to increase food prices through fertilizer and shipping costs, with effects delayed by months.
- Key upcoming events include a Fed rate decision, Russian export ban deadlines, and potential talks between Gulf states and Iran.