Morgan Stanley Warns Oil Prices Will Hit $150. Latest IEA Report: Crude Inventory Decline Rate Hits Record.

The IEA's monthly report released Wednesday showed that global crude and refined product inventories fell at a rate of nearly 4 million barrels per day in April, equivalent to the combined daily consumption of the UK and Germany; global oil inventories have dropped by a cumulative total of nearly 250 million barrels since the outbreak of the war.

According to Goldman Sachs (GS) forecasts, current total global oil inventories represent approximately 101 days of global demand, down four days from 105 days at the end of February, and are expected to drop to 98 days by the end of May at the current rate. Although this figure is higher than the minimum 61-day emergency reserve mandated by the EU for member states and the estimated onshore minimum operating inventory of 30 to 40 days for the global oil system, liquid crude inventories are nearly exhausted once actual inventory "red lines" are deducted.

Furthermore, Antoine Halff, a researcher at Columbia University's Center on Global Energy Policy and co-founder of geospatial analytics firm Kayrros, pointed out that current inventory depletion is unevenly distributed across both regions and product types, with the largest declines occurring precisely in areas with the lowest market visibility. In other words, regions facing severe inventory crises remain unseen by the market, which could lead to a future crude oil crisis being triggered prematurely in the shadows.

A Goldman Sachs research report noted that onshore commercial refined product inventories are the segment with the fastest depletion, lowest visibility, and most concentrated risk. According to Goldman's estimates, global commercial refined product inventories have rapidly declined from 50 days of demand before the war to the current 45 days. Among these, non-OECD refined products—those in emerging markets and developing countries—saw inventories plunge from 49 days to 43 days, a 10% decline, making it the most aggressively depleted segment; meanwhile, OECD refined product inventories in developed countries fell from 40 days to 38 days, a decline of approximately 5%. Generally, the latter is easier to forecast due to more comprehensive data and higher visibility.

Currently, China and Singapore are among the few regions where refined product inventories have increased, as both have reduced their exports of refined products.

While crude inventories are reaching critical levels, the IEA noted that the reduction in supply caused by the closure of the Strait of Hormuz has been offset to some extent by a decline in crude demand. Assuming the situation concludes by early June, European oil consumption is expected to drop by 140,000 barrels per day this year, the largest demand contraction since the outbreak of the Russia-Ukraine conflict. However, if the conflict persists beyond that point, European demand will face further compression. Asia has been the region most severely impacted by Middle Eastern crude disruptions, with several countries experiencing significant declines in consumption.

Oil prices currently remain relatively calm, with WTI crude futures near $102, up slightly on the day, and Brent crude near $107, down slightly. However, Rats points out that if the blockade of the strait persists until late June or even July, Brent crude's current stability will be shattered, and it will "inevitably undergo the price adjustment it had previously managed to avoid."

According to Morgan Stanley's forecasts, under the base-case scenario, Brent crude will remain at $100/barrel in the third quarter, drop to $90/barrel in the fourth quarter, and retreat to $80/barrel in 2027. In an extreme scenario, however, if the crude oil buffer reserves of both China and the U.S. are exhausted while the strait has not yet reopened normally, Brent could surge to $130-$150/barrel.

Swissquote analyst Ipek Ozkardeskaya warned that if the war in the Middle East does not end quickly, the world will begin to face oil shortages, including the G7 advanced economies.

JPMorgan Chase (JPM) Analysts, meanwhile, believe that the accelerated depletion of inventories could eventually force the Strait of Hormuz to reopen in some manner. Even so, it would take several weeks for the market to restore normal flows, and a risk premium for potential further disruptions to the strait would persist.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.