Oil Inventories Plunge at Record Pace

Global oil inventories drew by 129 million barrels in March and by a further 117 million barrels in April , according to the International Energy Agency's May report, as mounting supply losses from the Strait of Hormuz deplete global oil inventories at a record pace . The IEA warned Wednesday that oil price spikes are likely over the peak summer demand period as rapidly depleting inventories pile more pressure on the market .

Global oil supply declined by a further 1.8 million barrels per day in April, taking total losses to 12.8 million barrels per day since the U.S.-Israeli war with Iran began on February 28 , according to CNBC. Cumulative supply losses from Gulf producers already exceed 1 billion barrels with more than 14 million barrels per day of oil now shut in , the IEA reported. According to market data, WTI crude traded at $71.50 per barrel on Wednesday, up 0.6%, while Brent crude stood at $75.20 per barrel, up 0.5%.

MarketWatch reported that global oil prices have climbed by nearly 50% since the end of February , though the rise pales in comparison to the estimated loss of nearly 1 billion barrels over the past 75 days. Global observed oil inventories declined at a rate of about 4 million barrels a day in March and April , Bloomberg reported, citing the IEA's monthly report.

Can Strategic Reserves Bridge the Gap?

Global oil inventories are projected to fall by an average of 8.5 million barrels per day during the second quarter of 2026, with the drawdown largely due to a decline in crude output from countries including Iraq, Saudi Arabia, Kuwait and the UAE , according to OilPrice.com's analysis of the IEA data. The release of a total of 400 million barrels by 32 IEA members is expected to provide a temporary buffer , but the market will still face a significant deficit.

Refinery crude throughputs are forecast to plunge by 4.5 million barrels per day in the second quarter to 78.7 million barrels per day , the IEA stated, as operators contend with infrastructure damage and lower feedstock availability. Relief has come from the Atlantic Basin, where exports from the United States, Brazil, Canada, Kazakhstan, and Venezuela have risen by 3.5 million barrels per day since February , according to Invezz. But the IEA cautioned that these increases are insufficient to offset the massive shortfall from the Gulf, noting that "the loss of Hormuz barrels has created a structural deficit that alternative suppliers cannot fully bridge" .

Saudi Aramco CEO Amin Nasser told investors that "if the Strait of Hormuz opens today, it will still take months for the market to rebalance, and if its opening is delayed by a few more weeks, then normalization will last into 2027" , CNBC reported Monday. More than 600 ships, mostly oil and product tankers, are currently stuck in the gulf , Nasser said, while around 240 ships are waiting outside Hormuz .

Will Trump's Beijing Summit Unlock the Strait?

President Donald Trump arrived in Beijing on Tuesday for a high-stakes summit with Chinese President Xi Jinping, with Iran likely to dominate the conversation despite trade being the official focus, CNN reported. Trump is expected to encourage Xi to push Iran to reopen the strait and to agree to a peace deal , according to U.S. officials cited by CNN.

Analysts expect Washington to press Beijing to use its influence over Tehran, particularly because China remains the largest buyer of Iranian oil — by far — purchasing more than 80 percent of Iran's shipped crude exports , Al Jazeera reported. US officials have suggested that China should play a greater role in pushing Iran to reopen the Strait of Hormuz, but analysts say Beijing will require concessions from the US, likely over Taiwan , according to Al Jazeera.

Oil prices are — counterintuitively — relatively low at the moment, given the scale of the supply disruption, with global benchmark Brent crude futures hitting $104 a barrel Monday, up 44% since the start of the war but still below the highs sparked by Russia's invasion of Ukraine in 2022 , CNBC's analysis noted.

Can the Pentagon Meet Its Rare Earth Deadline?

Beyond oil, another energy-critical supply chain faces a looming crisis. OilPrice.com reported that an ominous Pentagon deadline looms large, with the entire American defense system to be banned from using any Chinese-origin rare earths materials beginning in January 2027 . The Iran conflict is burning through precision-guided munitions that rely on rare earth-based components, while China is tightening export controls and enforcement across the global supply chain , according to the report.

China currently controls most global rare earth refining, separation, and metallization capacity used to produce HREEs like dysprosium, terbium, neodymium-praseodymium alloys, and high-performance magnet materials used in missile systems, fighter aircraft, EV drivetrains, modern energy infrastructure, advanced healthcare and robotics , OilPrice.com stated. During the war with Iran, the US has already launched hundreds of missiles and precision-guided weapons in an air campaign that has consumed billions of dollars in advanced military hardware in just weeks, with reports from the South China Morning Post and Reuters indicating Washington could have only weeks or months of certain rare-earth inventories available for defence manufacturing if supply disruptions deepen .

How Is AI Reshaping Energy Demand?

While geopolitical crises dominate headlines, a quieter transformation is underway in energy markets. OilPrice.com reported that researchers are increasingly employing artificial intelligence to help them solve some of the biggest challenges facing the energy sector – including, ironically enough, the massive spike in energy demand caused by large language models themselves .

Electricity demand from data centres soared by 17% in 2025, and that of AI-focused data centres climbed even faster – well outpacing growth in global electricity demand of 3% , the IEA reported in January. Data centers accounted for 17% of electricity demand growth worldwide last year, according to the IEA report, compared with around 50% in the U.S. , Fortune reported in April.

Driven by data centre investments, the capital expenditure of five large technology companies surged to more than $400 billion in 2025 and is set to increase by a further 75% in 2026 , according to the IEA. Per Polygon data, Henry Hub natural gas traded at $3.25 per MMBtu on Wednesday, down 2.4%, as the fuel remains critical for powering the data center boom. Natural Gas Intel reported that June natural gas futures recovered some lost ground Wednesday but again stalled below $3.00/MMBtu, as a fresh drop in Lower 48 production and an approaching heat wave gave bulls momentum .

What Changed This Week

The International Energy Agency's May report crystallized the severity of the oil supply crisis, revealing that inventories are falling at 4 million barrels per day—the fastest pace on record. With more than 1 billion barrels already lost and the Strait of Hormuz still largely closed, the market faces a structural deficit that strategic reserve releases can only temporarily buffer. Meanwhile, President Trump's arrival in Beijing for talks with Xi Jinping has elevated hopes for a diplomatic breakthrough on Iran, though analysts remain skeptical that China will provide assistance without extracting concessions on Taiwan or trade.

What to Watch

The Trump-Xi summit concludes Friday, with markets watching for any joint statement on Iran or energy cooperation. The IEA projects the steepest inventory draws will occur in May and June, potentially pushing Brent crude prices higher during peak summer demand. The U.S. Energy Information Administration releases its next Short-Term Energy Outlook on June 9, which will provide updated forecasts for the second half of 2026. On the rare earths front, defense contractors face intensifying pressure to qualify non-Chinese suppliers before the January 2027 Pentagon deadline, with several major procurement decisions expected this summer.