Global Oil Storage Approaches Critical Thresholds as Asia Hits Minimum Operating Levels

Asia has reached minimum operating storage levels for the first time since the Strait of Hormuz closure began in late February, with Europe expected to follow within weeks and the United States facing potential shortages by July 2026.

The warning came from Jeff Currie, Chief Strategy Officer of Energy Pathways at the Carlyle Group, who told CNBC that Asia is “already close to these so-called ‘minimum operating levels.'” He added that Europe would “start to have problems sometime after this bank holiday,” with the U.S. following by early summer. The International Energy Agency’s Fatih Birol reinforced the urgency: “We may be entering the red zone in July or August if we don’t see improvements.”

Three months into Iran’s blockade of the Strait — which began 28 February and became fully effective by 4 March — the world has lost access to roughly 20% of seaborne oil trade. The cumulative supply disruption reached 782 million barrels by 8 May, per Oilprice.com analysis using Kpler shipping data, and is on track to exceed 1 billion barrels by late May. Unlike previous oil shocks that primarily affected prices, this crisis is depleting physical inventories faster than markets anticipated.

The Storage Math Behind the Crisis

Global oil inventories fell by 250 million barrels over March and April alone — a drawdown rate of 4 million barrels per day, according to the IEA‘s May oil market report. March saw 129 million barrels withdrawn, followed by 117 million in April. The U.S. Energy Information Administration projects inventories will decline by an average of 8.5 million barrels per day in Q2 2026, pushing the cumulative deficit to 900 million barrels by September if the Strait remains closed.

Asia-Pacific inventories outside China have dropped 70 million barrels since the conflict began, with Fortune identifying Indonesia, Vietnam, Pakistan, and the Philippines as facing critical shortages within one month. The region’s storage infrastructure was never designed to absorb a three-month supply disruption of this magnitude while maintaining operational buffers for refining and distribution.

Minimum operating levels refer to the volume of crude and refined products that must remain in storage infrastructure to maintain system functionality — the oil trapped in pipeline networks, tank bottoms that cannot be pumped, and working inventory needed for continuous refinery operations. JPMorgan estimates that of the roughly 580 million barrels of onshore inventories globally, much is locked in these operational constraints and cannot be accessed even in emergencies.

Strategic Reserves Near Exhaustion

U.S. commercial crude inventories declined 7.9 million barrels for the week ending 15 May, while the strategic petroleum reserve fell 9.9 million barrels — the largest weekly SPR withdrawal on record, citing Gulf News reporting EIA data. The SPR now stands at its lowest level since July 2024. The prior week’s withdrawal of 8.61 million barrels was the second-largest on record.

Coordinated releases from G7 and IEA member countries have totaled approximately 400 million barrels since March, yet accessible global buffers continue shrinking. The EIA‘s Short-Term Energy Outlook, published 12 May, notes that rebuilding depleted inventories to pre-crisis levels will require 1 million barrels per day of additional supply for three years after the Strait reopens — assuming production capacity remains intact.

Price Volatility and Macro Contagion

Brent crude traded at $105 per barrel on 25 May, down from a peak of $138 on 7 April but still elevated relative to pre-crisis levels below $85. WTI stood at $98, maintaining a $7 spread that reflects U.S.-specific inventory pressure. Data from Trading Economics shows the March-May average has held between $115-117 per barrel despite extreme daily volatility — implied Brent volatility reached its highest level since COVID-19, with daily readings hitting 106% on 12 March.

The stagflation implications are materialising faster than GDP impacts. Bank of America Economics noted the disruption is “consistent with a stagflationary shock that would impact inflation earlier and more prominently than GDP growth.” Global oil demand has already contracted by 420,000 barrels per day year-over-year in 2026, reversing pre-war forecasts of 730,000 barrels per day growth, according to the IEA. The Q2 2026 demand decline of 2.45 million barrels per day represents the sharpest contraction since COVID-19 lockdowns.

From Crude Shortage to Fuel Crisis

Currie’s analysis extends beyond crude storage to refined products, where constraints are emerging faster. “The problem here in Singapore continues. It just moved from jet to diesel,” he told CNBC, referencing the shift in which refined products face the tightest supply. Natasha Kaneva, head of global commodities strategy at JPMorgan, warned that “the next phase of this shock may look less like a traditional crude spike and more like a refining and end-user fuel crisis.”

Gulf producers have been forced to curtail production by more than 10 million barrels per day as storage capacity fills with crude that cannot reach export markets. Iraq, Saudi Arabia, the UAE, and Kuwait have all implemented rotating shutdowns of production facilities, creating a supply overhang in the region even as Asia, Europe, and North America face deficits.

What to Watch

The July-August window identified by both Carlyle and the IEA represents the most critical juncture. If the Strait remains closed through June, Europe will likely exhaust accessible storage buffers before the U.S., given its greater dependence on Middle Eastern crude and lack of large-scale strategic reserves comparable to America’s SPR. Asian refiners in Indonesia, Vietnam, and Pakistan face immediate operational disruptions within 30 days.

Central banks confront an impossible choice: tighten policy to combat energy-driven inflation or ease to offset demand destruction and credit stress in energy-intensive sectors. Equity markets have begun rotating out of growth stocks into energy and commodities, but this positioning assumes prices will resolve supply constraints — a mechanism that fails when physical molecules cannot reach buyers regardless of price.

Currie’s prescription is blunt: “The only way you solve this problem is to increase the availability of molecules.” That requires either a diplomatic resolution that reopens the Strait or a massive, coordinated increase in production from non-Gulf sources — neither of which appears imminent. The IEA estimates that even if the Strait reopens immediately, the inventory deficit will take until 2029 to fully restore at current production capacity. For now, the countdown to minimum operating levels continues across three continents simultaneously.