【Iran Crisis】UBS: If Strait of Hormuz Continues to be Blocked, Global Oil Inventories Will Fall to New Lows by End of April, Oil Prices Will Rise Above $150

The situation of the Middle East oil transportation route, the Strait of Hormuz, remaining blocked has not been resolved. UBS points out that if the blockade continues, based on current oil consumption rates, global oil inventories will fall to a record low by the end of April, and Brent crude oil prices could rise above $150 per barrel.

Full rescue efforts still face a 10 million barrel shortfall

The report estimates that under normal conditions, the Strait of Hormuz carries about 20.5 million barrels of oil daily. Even if the international community immediately utilizes all feasible alternative supplies—including Saudi Arabia’s onshore oil pipelines capable of transporting 5 million barrels per day, the UAE’s onshore pipelines supplying 0.5 million barrels per day, Iran’s continued exports of about 1.7 million barrels per day, and the International Energy Agency (IEA) releasing approximately 3.3 to 4 million barrels of strategic reserves daily—the total supply would only amount to about 10.5 million barrels per day. This can only cover roughly half of the supply loss, leaving the market facing a significant daily supply gap of about 10 million barrels, which must be quickly filled by tapping into global reserves.

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UBS conservatively estimates that if the situation in the Strait of Hormuz does not see substantial improvement by March, Brent crude prices will rise to around $120 per barrel in the short term, and further increase to $150 or higher in the second quarter.

IEA releasing strategic reserves can only fill 30% of the gap

UBS analyst Henri Patricot points out that the IEA plans to release 400 million barrels of oil reserves, which only accounts for about 30% of the losses caused by a complete blockade of the Strait of Hormuz. This is insufficient to fundamentally reverse the rapid depletion of inventories.

Additionally, according to details disclosed by the IEA, the released strategic reserves consist of 72% crude oil and 28% refined products. Asian member countries will bear about 25% of the total release volume, which can be implemented immediately, but some oil from the Americas and Europe will only be available by late March.

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