Strategic Oil Reserves Release a Limited Solution for Unbalanced Market: S&P Global Energy
Plans for the largest-ever distribution of emergency oil reserves, announced by the International Energy Agency this week, are projected to provide only a limited solution if the critical Strait of Hormuz remains closed, according to an analysis by S&P Global Energy. The IEA's unprecedented move to release 400 million barrels of oil aims to mitigate severe disruptions in global energy supply caused by the ongoing West Asia conflict.
Market Imbalance and Asian Impact
S&P Global Energy asserts that while the release of strategic oil reserves will help the market adjust to current imbalances, its effectiveness in supporting the most affected markets, particularly in Asia, remains uncertain. The agency notes that it will take months for the 400 million barrels to compensate for the 430 million barrel reduction in global supply observed in March alone.
Jim Burkhard, Vice President and Global Head of Crude Oil Research at S&P Global Energy, emphasized the gravity of the situation. "There is too much oil that cannot be exported via the Strait of Hormuz and not enough in Asia, where stocks are running down. The market is seriously unbalanced and that will continue until the Strait is reopened and upstream and downstream operations return to normal. It will not happen quickly," he stated.
Historic Supply Disruption
The disruption in the Strait of Hormuz represents the largest oil supply disruption in recorded history. S&P Global Energy estimates that approximately 3 to 4 million barrels per day of oil were exported in the first 11 days of March via alternative routes bypassing the Strait. In stark contrast, before the conflict, 21 million barrels per day of oil exports transited through this crucial waterway.
Price Outlook and Volatility Risks
In response to these developments, S&P Global Energy has updated its base case outlook, anticipating Dated Brent prices to range between USD 70 and USD 100 on a monthly average basis for the remainder of 2026. This forecast assumes that secure tanker flows via the Hormuz Strait will resume in the coming weeks. However, the potential for exceptional volatility persists due to the ongoing uncertainty.
The analysis warns that if the Strait of Hormuz were to be closed for a couple of months instead of weeks, crude oil prices would likely surge to new record highs, exacerbating global economic pressures. This underscores the limited nature of the strategic reserves release as a stopgap measure in an increasingly unbalanced market.
