The head of the International Energy Agency sounded the alarm Monday, warning that commercial oil inventories are being drawn down at a rapid rate and may only hold out for a few more weeks — a direct consequence of the war in Iran and the ongoing closure of the Strait of Hormuz to shipping traffic.
Fatih Birol, who was attending the Group of Seven finance ministers’ gathering in Paris, told reporters that the coordinated release of strategic petroleum reserves has been adding 2.5 million barrels per day to global supply, but cautioned that those stockpiles “are not endless.”
He also flagged a looming seasonal pressure: the arrival of spring planting and summer travel in the northern hemisphere will accelerate the depletion of inventories as demand climbs for diesel, fertilizer, jet fuel, and gasoline.
A Disconnect Between Markets
When asked what he had conveyed to G7 participants, Birol described what he called a “perception gap” between how physical oil markets and financial markets are reading the situation — suggesting that traders may not yet be fully pricing in how tight supply has become.
He noted that before the U.S. and Israel launched strikes against Iran at the end of February, global oil markets were sitting on a significant surplus with commercial inventories at elevated levels. That picture has changed sharply since the conflict began.
Birol said commercial stocks would last “several weeks,” but stressed that they “are declining rapidly.”
Record Inventory Drawdowns
The IEA reported last week that global oil supply will fall short of total demand throughout 2026 as the Iran conflict disrupts Middle East production and stockpiles are drained at a pace the agency described as unprecedented. This marks a sharp reversal from the IEA’s earlier projection of a market surplus this year.
Global observed oil inventories fell by 246 million barrels in March and April combined — the steepest drop on record, according to the agency’s latest monthly oil market report.
In March, the IEA’s 32-member body coordinated the largest strategic reserve release in its history, agreeing to withdraw 400 million barrels in an effort to stabilize markets. Around 164 million barrels had been released by May 8.
For the full year, global oil supply is now expected to run roughly 3.9 million barrels per day below demand — a dramatic revision from the agency’s prior estimate of a 1.5 million barrel-per-day shortfall.
