UBS economists say global oil stocks may plunge to record lows within weeks if the Strait of Hormuz stays effectively closed. In a note issued on Tuesday, Arend Kapteyn highlighted the speed of current inventory drawdowns and warned they point to "all-time low levels by the end of April," raising the prospect of a sharp supply squeeze and significant upward pressure on crude prices.
Kapteyn set out a scenario in which alternative flows - specifically pipeline shipments from Saudi Arabia and the United Arab Emirates - combined with ongoing Iranian exports and releases from International Energy Agency inventories, "could offset roughly half of the oil lost" as a result of a Hormuz shutdown. He said that, even with those offsets, there would remain "a shortfall of around 10 Mb/d," a gap that would force rapid depletion of global crude and product inventories.
The note also emphasised the uneven distribution of remaining inventories. Kapteyn pointed out that China currently holds roughly four months of crude imports in storage, whereas many low-income Asian economies would reach critical inventory levels much sooner. UBS highlighted that this imbalance "raises the risk of panic buying, as countries attempt to secure supplies before inventories are exhausted."
On price implications, Kapteyn outlined a conservative projection in the event Hormuz stays closed: oil could "conservatively reach around $120/bbl by end-March and $150/bbl by end-April," with the potential to climb to $160/bbl if there is no clear evidence of demand destruction. Those price levels reflect the scale of the stated shortfall and the limited capacity of alternate flows and releases to fully bridge it.
Contextual note: The projections and risk assessments above are those presented in the UBS note and reflect the assumptions explicitly stated by the economist. Where information is limited in the note, the assessment does not extend beyond the scenarios and figures supplied.