Summer Demand Adds Pressure To Oil Markets
Oil prices could face renewed spikes during the peak summer demand period as global inventories fall rapidly, according to the International Energy Agency. In its latest monthly update, the agency warned that mounting supply losses are creating additional pressure across an already strained energy market.
The IEA’s May oil market report said global supply fell by another 1.8 million barrels per day in April. That brings total losses to 12.8 million barrels per day since the US-Israeli war with Iran began on February 28.
Hormuz Disruption Drains Inventories
The agency said that more than ten weeks after the Middle East conflict began, supply losses linked to the Strait of Hormuz are depleting global oil inventories at a record pace. The strait remains central to the crisis because of its role as a major transit route for crude and energy products.
International benchmark Brent futures traded near 107 dollars per barrel on Wednesday, while US crude futures were just above 101 dollars. Prices remain highly sensitive to any sign of further disruption, inventory stress or policy intervention.
Demand Destruction Begins To Build
The IEA also warned that the war is beginning to weigh on demand. The agency forecast a year-on-year contraction of 420,000 barrels per day by the end of 2026, bringing demand to 104 million barrels per day.
The petrochemical and aviation sectors are currently the most affected. However, the IEA said higher prices, a weaker economic backdrop and demand-saving measures are expected to increasingly reduce fuel use across the broader economy.
Morgan Stanley Sees Further Losses
Morgan Stanley expects the market to lose another billion barrels over the course of 2026. The bank pointed to the time required to restart oilfields, repair refineries and reposition the global tanker fleet.
Martijn Rats, commodities strategist at Morgan Stanley, described the current disruption as the largest in the history of the oil market. Saudi Aramco chief executive Amin Nasser and IEA head Fatih Birol have also characterized the scale of the shock in similar terms.
Stockpiles And OPEC+ Try To Offset Losses
Commercial and government stockpiles are being released to offset part of the supply shortfall. These releases can help stabilize the market in the short term, but they also reduce buffers if the conflict drags on or demand rises sharply during the summer.
OPEC+ also agreed to increase oil output by 188,000 barrels per day in June. The move follows a May increase of 206,000 barrels per day and comes after the United Arab Emirates officially departed OPEC on May 1.
Investors Face A Volatile Energy Outlook
The latest OPEC+ increase involves seven producers: Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman. While the additional supply may provide some relief, it is small compared with the scale of losses reported since the war began.
For investors, the main risk is that inventory drawdowns, summer demand and prolonged disruption in the Strait of Hormuz combine to produce another price shock. Energy markets may remain volatile even if output rises, because the underlying supply gap is large and the timeline for restoring normal flows remains uncertain.
