The note argues that record fast crude inventory draws are being misread as evidence of no supply problem, when in fact roughly 11 million b/d of shut in production is being offset by a combination of higher refinery throughput, SPR releases and storage drawdowns, none of which are sustainable. If global onshore inventories including SPR are genuinely six weeks from operational minimums, this suggests the market is significantly underpricing tail risk around a supply driven price spike, particularly if any resolution to the Hormuz situation is delayed.
The piece is here, its a great read, much better than my trimmed down version below, but it may be gated:
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Warns oil market is ignoring an 11 million b/d shortfall, masked by inventory draws now six weeks from operational minimums.
Summary:
- The commentary argues the market has convinced itself that record fast crude inventory draws mean there is no supply issue, despite roughly 11 million b/d of production remaining shut in, according to the WCTW newsletter
- It says the apparent shift from a crude shortage to a product shortage reflects higher refinery throughput, China's export ban, SPR releases and crude storage drawdowns rather than genuine demand destruction
- It dismisses claims that the Strait of Hormuz is effectively open via dark fleet transits or ship to ship transfers, noting cited examples actually involve bypass routes such as Fujairah
- It warns global onshore crude inventories, including SPR, are roughly six weeks from reaching operational minimums
A new commentary argues the oil market is misreading record fast inventory draws as proof there is no supply problem, despite roughly 11 million b/d of production remaining shut in. The apparent shift from crude shortage to product shortage, it says, reflects higher refinery runs, China's export ban, SPR releases and storage drawdowns, not falling demand. Claims that the Strait of Hormuz is effectively open through dark fleet transits or ship to ship transfers are dismissed, with cited examples actually involving bypass points like Fujairah. The piece warns that global onshore inventories, including strategic reserves, are around six weeks from operational minimums, meaning current calm could give way quickly to acute shortage once those buffers are exhausted.
