FX.co ★ OECD oil stocks set to fall to lowest level since 2003 as Middle East crisis drains reserves

Commercial and strategic crude oil inventories in Organization for Economic Cooperation and Development (OECD) countries are set to fall to their lowest levels in 23 years, according to Reuters, citing an official forecast from the US Energy Information Administration (EIA). The reserves of the world’s largest developed economies are being depleted at a record pace, driven primarily by a prolonged geopolitical crisis in the Middle East. If the armed conflict in Iran escalates more, the drawdown of storage could become uncontrollable.

US analysts calculate that by December, total OECD oil stocks will shrink to a critical 2.3 billion barrels, an all‑time low in the agency’s recordkeeping. The sharp fall reflects an 11-million-barrel drop in average daily output from Persian Gulf producers since the start of hostilities. The EIA notes that leading consumers have been forced to release oil from strategic reserves en masse to artificially stabilize market prices, without which benchmark grades could already be trading at extreme levels.

The onset of the summer season adds a destabilizing risk for the global energy market. Paul Diggle, chief economist at asset manager Aberdeen, warns that the traditional peak travel season will inevitably trigger a sharp seasonal rise in demand for road and aviation fuels. He cautions that if shipping through the Strait of Hormuz is not fully restored by then, the global economy will face a severe supply shortfall. Under such a scenario, North Sea Brent could receive a powerful upward impulse and potentially test record highs, reaching $180 per barrel by year end, dealing a heavy blow to the stability of Western economies.