Global oil stockpiles could hit record lows by May

Global oil inventories could approach all-time lows by the end of May due to the ongoing closure of the Strait of Hormuz, according to an analysis from UBS announced on 16 May 2026. The key maritime chokepoint has been blocked for weeks, severing the transit route for nearly one-fifth of the world's seaborne oil supply. This disruption threatens to drain commercial stockpiles that were already below their five-year seasonal average.

Why the Strait of Hormuz matters for oil markets

The Strait of Hormuz is the world's most critical oil transit chokepoint. An average of 21 million barrels per day flowed through it in 2025, representing about 21% of global oil demand. The channel is the only viable sea route for exports from major producers Saudi Arabia, Iraq, the UAE, Kuwait, and Qatar. Its closure forces tankers to seek far longer alternative routes, adding weeks to delivery times and effectively removing barrels from immediate market availability.

How quickly could global stockpiles deplete

Global oil inventories stood at approximately 4.2 billion barrels at the start of the closure. UBS modeling suggests a drawdown of 1.8 to 2.2 million barrels per day from these stocks is now likely to meet ongoing demand. At that rate, total inventories would fall below the record low of 3.95 billion barrels set in 2021 by the final week of May. The draw is concentrated in commercial stocks held by refiners and traders, not government-controlled strategic reserves.

The immediate price reaction and market mechanics

The physical supply shock has already propelled front-month Brent crude futures above $110 per barrel. The market structure has shifted into a steep backwardation, where near-term contracts trade at a significant premium to later-dated ones. This price signal encourages the immediate drawdown of stored oil. The premium for Brent crude for delivery in June versus December has widened to over $12 per barrel, the highest level since the 2022 energy crisis.

Limitations and alternative supply routes

A key limitation to the bearish inventory forecast is the potential for increased production from non-OPEC sources. The United States, currently producing a record 13.5 million barrels per day, could accelerate shipments from its Gulf Coast ports. However, these volumes would take weeks to reach key Asian markets. Overland pipelines from the Arabian Peninsula, such as the East-West Pipeline in Saudi Arabia, have limited spare capacity of roughly 2 million barrels per day, insufficient to offset the maritime shortfall.

How institutional traders are positioning

Managed money funds have built their largest net-long position in crude oil futures in over two years, CFTC data shows. This reflects a consensus bet on sustained high prices. Physical trading desks at major banks are reporting intense bidding for any available cargo not routed through the Persian Gulf. The scramble for alternative grades from the Atlantic Basin and West Africa has pushed their prices to multi-year highs relative to the Brent benchmark.

What is the Strait of Hormuz

The Strait of Hormuz is a narrow sea passage between Oman and Iran, connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea. At its narrowest point, it is just 21 nautical miles wide. Its closure affects roughly 80% of the oil exported from Gulf Cooperation Council (GCC) countries.

What are strategic petroleum reserves (SPRs)

Strategic petroleum reserves are government-owned emergency stockpiles of crude oil. The International Energy Agency (IEA) mandates member countries to hold reserves equivalent to 90 days of net imports. Coordinated releases from these reserves, like the 60-million-barrel release in 2022, could temporarily ease market tightness but are not a permanent solution to a closed chokepoint.

How does this affect gasoline prices

Retail gasoline prices are a lagging indicator, typically reflecting refinery costs for crude oil purchased weeks earlier. However, the current futures price surge points to significant pump price increases globally within 4-6 weeks. European and Asian markets, more dependent on Gulf crude, will feel the impact sooner and more sharply than the United States. For more on energy market dynamics, see our analysis on the Fazen Markets website.

Bottom Line

A prolonged Hormuz closure will push global oil inventories to historic lows within weeks, sustaining extreme price volatility.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.