Oil Stockpiles Drain at Record Pace

The world has burned through oil inventories at a record speed as the Iran war throttles flows from the Persian Gulf, eating into the very buffer that protects against supply shocks , according to Bloomberg. According to the May 2026 Oil Market Report by the International Energy Agency (IEA), global oil supply is projected to fall by 3.9 million bpd across 2026, with approximately 10.5 million bpd of Gulf oil production currently offline . Morgan Stanley estimates global oil stockpiles dropped by about 4.8 million barrels a day between March 1 and April 25 , per Fortune.

The conflict has caused the restriction of nearly all traffic through the Strait of Hormuz, leading to what the International Energy Agency has characterised as the "largest supply disruption in the history of the global oil market" . 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%.

According to preliminary IEA data, global oil stockpiles fell by 129 million barrels in March and by a further 117 million barrels in April following US and Israeli strikes on Iran and the subsequent disruption to Gulf exports , Euronews reported. Global demand is forecast to contract by 420,000 bpd due to surging prices, slow economic growth and widespread flight cancellations, with oil demand still set to outpace supply by 1.78 million bpd in the current year , according to OilPrice.com.

Can Emergency Reserves Bridge the Gap?

In response to this disruption, IEA Member countries agreed to release 400 million barrels of oil from their emergency stocks – the largest collective action since the Agency's founding more than 50 years ago . But the relief may be temporary. Chevron Corp. Chief Financial Officer Eimear Bonner told Bloomberg TV on May 1 that "a lot of the inventory and spare capacity has been depleted already," warning that "we are going to start to see some import-dependent countries potentially start to face critical shortages as we get into the June-July time-frame" .

Oil inventories in the Asia-Pacific region outside of China have been hit hardest, falling by about 70 million barrels since the conflict began, according to Kayrros co-founder Antoine Halff, with stockpiles in Japan and India at an at least 10-year seasonal low, down 50% and 10%, respectively, since the war began , Fortune reported.

According to the IEA, global oil inventories are projected to fall by an average of 8.5 mb/d 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, with the steepest inventory draws projected to occur in May and June, helping to keep Brent crude prices elevated at approximately $106 per barrel , OilPrice.com reported.

Why Is Cuba Running on Empty?

In a separate energy crisis, Cuba said the country has completely run out of the diesel and fuel oil it needs to keep its power plants running, with civil unrest starting to break out amid a de facto US energy blockade of the communist-run nation, with Energy Minister Vicente de la O Levy saying during a press conference late Wednesday that "the system has, once again, been left without any fuel reserves" and "there's absolutely nothing" , Bloomberg reported.

According to Reuters news agency, which has reporters on the ground in Havana, protests broke out in the city on Wednesday evening, with hundreds crowding the streets, blocking roads with garbage and shouting "turn on the lights" , CNBC reported. Blackouts have increased across Havana, prompting protests in multiple neighborhoods by residents who are tired of going up to 22 hours a day without power , according to MarketScreener.

Cuba had been heavily dependent on oil from Venezuela, but the communist-run Caribbean island has effectively been cut off since early January when the U.S. launched a military operation to remove Venezuelan President Nicolás Maduro , CNBC reported. The U.S. State Department said Wednesday that it was willing to provide $100 million in aid to Cuba, adding that Washington "continues to seek meaningful reforms to Cuba's communist system," stating that "the decision rests with the Cuban regime to accept our offer of assistance or deny critical living-saving aid and ultimately be accountable to the Cuban people for standing in the way of critical assistance" .

What's Happening in the Permian Basin?

While global markets face shortages, the Permian Basin is drowning in natural gas. Pipeline constraints in the Permian Basin continued to pressure U.S. natural gas markets, with prices at the Waha Hub remaining in negative territory for a record 47 consecutive days , according to Reuters via Pipeline & Gas Journal. Waha Fixed price has averaged -$1.84/MMBtu this year through May 7 and just over -$4.00/MMBtu last month, with the balance of the Summer 2026 strip, June through October, at -$1.75/MMBtu for fixed price as of May 7 , according to AEGIS Hedging.

Over the past week, spot prices at the Waha gas trading hub in the Permian Basin fell as low as -$9.75 per million British thermal units, with expectations that it could hit -$10 when pipeline capacity tightens as operators perform seasonal maintenance later this year , Fortune reported. Since negative prices mean producers have to pay to someone to take the supply off their hands, excess natural gas is often burned off, and so-called flaring events this season are at five-year highs .

Kinetik revised its full-year 2026 shut-in estimate upward to 220 MMcf/d, out of 1.8 Bcf/d, more than double its previous guidance of 100 MMcf/d, with the company saying all shut-ins are coming from gas-focused customers, not oil-directed producers, with CEO Jamie Welch describing the divergence bluntly: "It is a tale of two cities: crude folks that are doing cartwheels and backflips, and those that are localized Waha gas-centric sellers are literally crying poverty" , according to AEGIS Hedging. According to market data, Henry Hub Natural Gas traded at $3.25/MMBtu on Wednesday, down 2.4%.

Is China's Gasoline Demand Collapsing?

China's gasoline demand is expected to slide further this year, as the Iran war pushes up oil prices and accelerates a long-term shift away from the internal combustion engine, with gasoline consumption expected to shrink 5.5% this year, according to a forecast from GL Consulting, which has downgraded its estimate from a previous 5.2%, making it the second-biggest contraction on record — and only after 2022, when China's draconian Covid lockdowns caused demand to collapse , Bloomberg reported.

According to data cited by Bloomberg, total car sales in China last month hit 1.4 million, the lowest since 2022, when China was still in the grip of Covid lockdowns, with internal combustion engine car sales suffering a decline of over 30%, while EV and hybrid car sales fell by a more modest 6.8% , OilPrice.com reported. As a result of the slump in gasoline car sales, new energy vehicles came to account for 60% of new car sales last month, the highest monthly portion of EVs and hybrids of total new car sales .

Can China Replace Imports with Domestic Gas?

In a positive development for China's energy security, Sinopec has secured official approval for 235.687 Bcm of proven geological reserves at the Ziyang Dongfeng shale gas field in China's Sichuan basin, marking the country's first ultra-deep shale gas field with reserves exceeding 100 Bcm, with the reserves approved by China's Ministry of Natural Resources and representing a major milestone for Sinopec's "Project Deep Earth – Sichuan and Chongqing Natural Gas Base" initiative , World Oil reported.

Located in the Sichuan basin, the Ziyang Dongfeng field targets the Cambrian Qiongzhusi Formation, described by the company as the world's oldest commercial shale formation, dating back roughly 540 million years, with reservoir depths ranging between 4,500 m and 5,200 m , according to World Oil. "After over a decade of persistent effort, we have taken Cambrian shale gas from zero to a hundred-billion-cubic-meter-scale reserve base," said Liu Wei, director of Sinopec Southwest Petroleum Bureau, adding that "this validates the formation's vast potential and gives us a replicable technical pathway to expand China's shale gas development frontier" .

Where Is Big Oil Expanding?

Despite the global energy transition narrative, major oil companies continue investing in new frontiers. The centerpiece of Suriname's commercial push is the GranMorgu project in Block 58, a $10.5 billion deepwater development operated by TotalEnergies with APA Corporation as partner, with the project having moved from planning into execution in 2026 and targeting first oil in 2028 , according to Caribbean Energy Week.

The GranMorgu project aims to develop resources on block 58, located around 150 kilometers off the Surinamese coast, specifically the Sapakara and Krabdagu fields, which contain recoverable reserves estimated at nearly 760 million barrels, with a total investment of $10.5 billion making the project of vital importance to the country , TotalEnergies stated. In all, between $1bn and $1.5bn is expected to be invested in local content, creating over 6,000 direct, indirect and induced jobs in Suriname .

What Changed This Week

The global energy landscape shifted dramatically this week as oil stockpiles drained at unprecedented rates while the Iran war continues to choke supply through the Strait of Hormuz. Cuba's complete depletion of diesel and fuel oil reserves triggered street protests and exposed the vulnerability of import-dependent nations. Meanwhile, the Permian Basin's natural gas glut deepened, with producers paying record amounts to dispose of excess supply even as Europe and Asia face shortages. China's gasoline demand decline accelerated beyond expectations as higher oil prices and EV adoption converged to reshape the world's largest oil import market.

What to Watch

The IEA projects global oil inventories will continue falling through June, with the steepest drawdowns expected in May and June. Watch for potential emergency stock releases beyond the 400 million barrels already committed by IEA members. Cuba's energy crisis could escalate if the U.S. blockade continues, with potential implications for regional stability. In the Permian Basin, new pipeline capacity from Kinder Morgan's Gulf Coast Express expansion is expected to enter service in the second quarter, which could provide temporary relief to negative gas prices. China's April car sales data, expected later this month, will provide further evidence of whether gasoline demand decline is accelerating. Finally, TotalEnergies' GranMorgu project in Suriname has begun development drilling, with first oil targeted for 2028, potentially adding 220,000 barrels per day to global supply.