Can global oil stocks survive another six months of the US-Iran war?

The world has billions of barrels of oil in storage. But as the US-Iran war drags on, the more important question is how many of those barrels can actually reach the market. With the supply gap estimated at around 5 million barrels per day, emergency stocks could come under severe pressure within six months.

Despite large headline inventories, the reality is more fragile. A significant share of global oil stocks is either tied up in commercial systems, already committed to buyers, or too slow to mobilise in a crisis.

That leaves a much smaller pool of truly usable barrels than the numbers suggest.

How big is the supply shock?

The scale of the disruption will determine how quickly those stocks are used up.

Saudi Aramco chief Amin Nasser has estimated that the world has lost around 2.6 billion barrels of oil since the start of the war. That makes it one of the biggest cumulative supply disruptions in history, second only to the shock triggered by the 1979 Iranian revolution.

The lost supply is equivalent to about 25 days of global oil consumption, based on pre-war demand of roughly 103 million barrels per day.

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But the market is not necessarily short of 11 million barrels every day.

Aramco has estimated that Gulf disruptions have removed about 11 million barrels per day from supply. Most analysts, however, put the actual gap between global supply and demand at around 5 million barrels per day.

That gap could have become larger after Ukrainian drone attacks disrupted the Caspian Pipeline Consortium (CPC) network in July. The system carries about 1.8 million barrels of oil a day, mainly from Kazakhstan.

Lower oil demand in China has provided some relief. But if the war continues and supply remains disrupted, stockpiles will have to make up the difference.

IEA stocks could cover about six months

The International Energy Agency has already released oil from emergency reserves.

In March, IEA member countries agreed to release 400 million barrels from emergency stocks to cushion the impact of the conflict.

The IEA’s stockpile includes both government-held reserves and commercial inventories. Together, these stocks amount to around 1.5 billion barrels.

At an assumed supply gap of 5 million barrels per day, that would theoretically cover about 300 days of lost supply.

But governments do not control all of that oil.

Commercial stocks are held by refiners and other companies for normal operations. They cannot simply be emptied during a crisis.

That leaves around 900 million barrels of government-controlled stocks.

At a 5-million-barrel-a-day shortfall, that would last for roughly 180 days, or about six months.

This is why another prolonged period of disruption could put the world’s emergency oil cushion under serious pressure.

America’s oil reserve is already low

The United States faces an additional problem. Its Strategic Petroleum Reserve, or SPR, has fallen to its lowest level in more than four decades.

The reserve has been used repeatedly in recent years, including during the current crisis. This has left Washington with much less room to respond to another major disruption.

There are also concerns about how much of the remaining oil can actually be delivered quickly.

A US Government Accountability Office report in May warned that parts of the SPR’s infrastructure were deteriorating. Analysts at Rapidan Energy have estimated that roughly a quarter of the reserve may no longer be readily available for release.

That would mean more than 100 million barrels could effectively be unavailable.

If only about 200 million barrels of the US reserve can be accessed quickly, that stockpile alone would cover just 40 days of a 5-million-barrel-a-day global supply gap.

Diesel and jet fuel are an even bigger concern

The problem is not limited to crude oil. The conflict has also damaged refineries in the Middle East and disrupted refining activity linked to Russian supplies. That has put additional pressure on refined products such as diesel and jet fuel.

According to Morgan Stanley, global inventories of diesel and jet fuel are near the bottom of their five-year range.

That leaves the market with less protection against another shock.

The distinction matters because having crude oil in storage does not automatically mean there is enough fuel available to consumers.

Refineries must be able to process the crude, and the finished products must then reach the countries and regions where they are needed.

A prolonged conflict could therefore create shortages in diesel and aviation fuel even before the world literally runs out of crude.

China may have the biggest cushion

China could be in a stronger position than many other major economies. Beijing does not publish detailed data on its strategic oil reserves. As a result, estimates vary widely.

Energy consultancy Energy Aspects estimates that China held nearly 1.7 billion barrels of crude in July. Other estimates put the figure closer to 1 billion barrels.

Even the higher estimate would give China a substantial buffer.

Before the war, China imported around 5.5 million barrels of crude a day through the Strait of Hormuz. A reserve of 1.7 billion barrels would theoretically cover almost a year of those imports. That gives China more room to absorb a prolonged disruption than many other major oil-consuming countries.

The global stockpile figure can be misleading

The IEA says total global oil stocks still look relatively comfortable when government reserves, commercial inventories, Chinese stocks and oil on ships are counted together.

But not all of that oil is a true emergency buffer.

Crude being transported on tankers may already belong to a buyer. Commercial inventories may be needed to keep refineries running. Government reserves may not be released immediately, and moving them to consumers can take time.

That means the oil that can actually be used to fill a sudden supply gap is much smaller than the headline global inventory figure suggests.

Six months could be a crucial test

The oil market therefore faces a race between the duration of the war and the depletion of available stocks.

If the supply gap remains around 5 million barrels per day, government-held emergency stocks could theoretically cover about six months.

But that is only a rough calculation. The actual picture will depend on how the conflict develops, how much supply returns, whether demand falls further, whether refinery outages continue and how quickly governments can release and transport their reserves.

The market is also vulnerable to additional disruptions, especially if oil flows through the Strait of Hormuz remain constrained.

The key question is no longer simply how much oil is stored around the world.

It is how much of that oil can be released, how quickly it can reach the market and whether refineries have enough capacity to turn it into the fuels the world needs.

If the war continues for another six months, those factors could determine whether global oil inventories provide a sufficient safety net — or whether the buffer begins to run dangerously thin.

(With inputs from agencies.)