The world's crude oil supply is currently reported to be shrinking at the fastest rate in history. This situation is due to the prolonged conflict in the Middle East that continues to block the global energy supply chain.
Data shows that world visible oil reserves have declined by 8.7 million barrels per day throughout May alone. This decline is almost twice as fast as the average rate since the start of the war 10 weeks ago.
Strait of Hormuz 'Crippled', Exports Remain 5%
The main cause of this very sudden 'drain' of oil stocks is the double sanctions imposed by both parties, namely Iran and the United States (US) in the Strait of Hormuz.
This crisis has triggered a supply shock that has never happened before. In order to balance the market and control prices from continuing to soar, governments around the world have had to work together to release oil reserves from their respective strategic reserves.
Markets Tight Until October
Last week, the Executive Director of the International Energy Agency (IEA), Fatih Birol, also issued a similar warning that world commercial oil stocks are decreasing at a very alarming rate.
In fact, the agency expects the world energy market to continue to experience "critical supply shortages" until October, even if the conflict in the Middle East is successfully ended in the near future.
Source: IEA (International Energy Agency)
Europe Begins to Lose Supply, Demand in China Also Decreases
Among the main causes of the decline in stocks in May, apart from the Middle East crisis, is due to the fall in the amount of "oil on water", namely tankers that are sailing to bring supplies.
The world's oil reserves are stored in two main places:
On land: In large storage tanks at ports or refineries (on shore inventory).
Above water: Oil that is being loaded and is in giant tankers that are sailing across the ocean to be delivered to buyer countries.
This oil floating in the middle of the ocean is called “oil on water”. Even though it has not yet reached its destination, market analysts still count it as part of the total “world reserves” because the oil exists and is on its way.
The effects are now beginning to spread to all corners of the world
European Fuel Crisis: The decline in oil imports is now starting to spread from Asia to Europe. For example, jet fuel imports to Europe are reported to have fallen by 60% compared to the 2025 average.
China’s Economy Slows: China, the world’s largest crude oil importer, is now showing “demand contraction” for crude. Oil refining activity there has declined, while domestic fuel sales fell 22% last month due to their weakening domestic economic activity.
Although world oil reserves have shrunk by an average of 4.6 million barrels per day since March, the global market is still fortunate because there is a large “buffer” that was built up in the nine weeks before the war began.
Latest Status of World Oil Prices
On the Futures market on Thursday, Brent crude oil was trading around US$106 per barrel. Although this figure represents an increase of more than 70% throughout the year, it is still below the war-era peak of more than US$126 per barrel.
The world is currently using emergency oil reserves to survive. For us in Malaysia, although our country is an oil producer, the impact of the global inflation chain and the disruption of sea transportation due to the Strait of Hormuz crisis still needs to be monitored because it can affect the cost of imported goods that we use every day.
