The closure of the Strait of Hormuz is causing a rapid depletion of commercial oil inventories, warns Fatih Birol, the chief of the International Energy Agency (IEA).
Birol made these comments at the Group of Seven finance leaders meeting in Paris on Monday. He revealed that strategic oil reserves have supplemented the market with 2.5 million barrels of oil per day. However, he warned that these reserves "are not endless," reported Reuters.
He added that commercial inventories could last for several weeks, but warned that supplies are being "depleted rapidly."
The upcoming spring planting and summer travel seasons in the northern hemisphere are likely to exacerbate the situation, increasing the demand for diesel, fertilizer, jet fuel, and gasoline.
Birol highlighted a "perception gap in the markets between the physical markets and the financial markets" for oil. He noted that the oil markets and inventories were in surplus before the U.S.-Iran war in late February. However, the war has drastically altered the situation.
Oil Crisis Deepens Amid Iran Conflict
The Iran conflict has disrupted Middle East oil production, pushing global oil supply below demand this year and reversing the IEA's earlier surplus forecast. In response, the IEA coordinated a record release of 400 million barrels from strategic reserves in March, with about 164 million barrels released as of May 8.
In April, Birol had warned of the "biggest energy security threat in history" due to the Hormuz crisis, which has resulted in the loss of 13 million barrels per day of oil supply.
Adding to the uncertainty, cryptocurrency traders are aggressively betting on crude oil prices amid escalating war rhetoric from President Donald Trump. Bettors currently assign a 63% chance that West Texas Intermediate crude will top $110 per barrel this month.
At the time of writing, the WTI Crude oil was trading 0.37% lower at $105.03 per barrel. At the same time, Brent crude oil was trading 0.23% higher at $109.51 per barrel.
Iran Creates Hormuz Body Amid US Warning
On Sunday, Trump warned Iran that time is running out to reach a peace agreement, saying the "clock is ticking" and urging Tehran to act quickly or face serious consequences. In a Truth Social post, Trump criticized Iran's response to the U.S. peace proposal as "totally unacceptable" because it sought to separate nuclear negotiations from broader peace talks.
Meanwhile, the Supreme National Security Council announced the creation of the Persian Gulf Strait Authority (PGSA), a new body aimed at managing operations in the Strait of Hormuz, which Iran has effectively closed while seeking to charge ships for passage.
In a post on X, the authority said it would provide real-time updates on Hormuz operations and developments. Iranian state-linked broadcaster Press TV previously described the initiative as a system to enforce Iran's sovereignty over the strategic waterway and issue regulations to passing vessels.