The war in Iran has triggered a global scramble for oil as disruptions in the Strait of Hormuz choke one of the world’s most critical energy shipping routes — but the global economy isn’t about to run out of oil.
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Instead, it may be running short of key fuels made from oil that keep planes flying and industrial supply chains running, analysts at Goldman Sachs warned in a recent note.
“The speed of depletion and supply losses in some regions and products are concerning, with easily accessible refined products buffers approaching very low levels fast,” Goldman Sachs analysts wrote in the Monday note.
That’s because while overall oil inventories remain above critical levels, shortages are emerging in specific refined products, especially jet fuel, petrochemical feedstocks like naphtha, and liquefied petroleum gas used to make plastics and chemicals.
Global commercial refined product stocks have fallen to about 45 days of demand, down from around 50 before the recent disruption, according to Goldman’s estimates.
That compares with roughly 101 days of demand for total global oil stocks.
Inventories of naphtha — a critical input for plastics and industrial chemicals — have fallen significantly, including a 72% drop in UAE Fujairah storage and a 37% fall in northwest Europe’s Amsterdam-Rotterdam-Antwerp hub since late February.
Asia outside China and parts of Europe appear particularly exposed to the shortages in refined fuels. South Africa, India, Thailand, and Taiwan are among the more vulnerable markets, Goldman’s analysts wrote.
Even where crude oil is available, it cannot always be converted into usable fuel quickly enough. Refining constraints, trade disruptions, and export restrictions are creating bottlenecks, meaning surpluses in one location do not easily offset shortages elsewhere.
Nowhere is this more evident than in aviation, where the world’s biggest carriers have canceled flights due to tightening jet fuel supplies.
Goldman estimates that European commercial jet fuel inventories — excluding government emergency reserves — could fall below the International Energy Agency’s critical 23-day threshold as soon as June.
The global energy markets have been thrown into disarray following the US and Israel’s attacks on Iran in late February, as supply disruptions through the Strait of Hormuz push crude oil futures over 50% higher.
“Even if Hormuz flows started recovering soon, any full normalization of deliveries would take at least several weeks,” the analysts wrote.
International Brent crude futures were trading around $113 per barrel early on Tuesday, while US West Texas Intermediate was around $104 per barrel.
