Global oil reserves have dropped to critically low levels, with analysts warning the world may run out of reserves in approximately four weeks according to CNN Business analysis. Crude stocks at Cushing, the largest US storage hub, have fallen to around 20 million barrels, while global oil stockpiles have reportedly dropped by 190 million barrels in recent months. The International Energy Agency's coordinated strategic reserves are at their lowest point since 1990, with the American emergency stockpile sitting at a 43-year low. Commercial inventories have reached what the industry terms operational stress, making it increasingly difficult to maintain pressure in supply chains. Brent crude has fallen from a wartime peak of $126.41 per barrel to below $80, with the benchmark trading around $79 per barrel on Friday and on track to fall roughly 10% for the week, representing a 38% decline from the four-month high reached in April.
Oil prices fell as prospects brightened for more supply after oil tankers began moving through the reopening Strait of Hormuz following a peace deal between the US and Iran. US President Donald Trump and Iranian President Masoud Pezeshkian signed the memorandum on Wednesday night, with terms calling for the full reopening of the strait without Iranian tolls for at least 60 days. US Central Command has since lifted restrictions on traffic to and from Iranian ports and coastal waters, while maritime safety officials have advised vessels transiting the strait to hug Oman's coastline to reduce the risk of mines. Tankers carrying previously stranded crude began exiting the waterway on Thursday, and Kuwait has said it will begin increasing production. Analysts expect the deal to release more than 85 million barrels of oil stranded in the Middle East Gulf into global markets, with the agreement also including the lifting of US sanctions on Iranian oil, which would further swell supply.
Restarting oil fields shut in for over three months is not a quick process, according to Rystad Energy chief economist Claudio Galimberti. As reported by the Associated Press, Galimberti stated that sentiment has clearly improved, but sentiment is not the same as supply. Economists at Capital Economics estimate that energy flows could reach 80% of pre-war levels by September. Iraq, whose fields sustained deeper shut-ins, may need close to a year to fully recover, according to the analysis. Kuwait Petroleum Corp said on Thursday it had lifted with immediate effect all force majeure notices issued during the war, contributing to the supply recovery efforts. Middle East producers are also gearing up to resume exports, with Iraq's oilfields ready to resume production and output will gradually return to normal, restoring previous rates, Oil Minister Basim Mohammed said. Industry figures told NBC News that traffic through the strait will return as a trickle rather than a flood, with volumes unlikely to reach prewar levels for weeks after the deal takes effect.
Goldman Sachs has revised its outlook accordingly, lowering its fourth-quarter 2026 Brent forecast to $80 per barrel from $90 previously, and projecting a 2027 average of $75. However, market experts remain cautious about the immediate price impact. "The market has jumped 7 steps ahead of where we are now," Helima Croft, head of global commodity strategy at RBC Capital Markets told CNN. "Everyone's like: 'This is over!' But there's a major logistical challenge to get back to where we were." Matt Smith of Kpler shares that scepticism, stating "Regardless of what happens in the coming weeks in the Strait of Hormuz, US consumers are in for higher prices in the summer months." Markets are pricing in the possibility that the Iran deal may not hold, as reported by The Economic Times, with the ongoing US Navy presence in the Gulf, combined with uncertainty over Iran's compliance, meaning traders have not fully priced out a geopolitical disruption.
