The war between the US and Iran is putting increasing pressure on the oil market, and after months of disruptions, an important question arises: how long can existing reserves cover the shortage of oil on the market?
At first glance, global stocks are high. However, the situation changes when considering only the oil that can actually be taken from reserves and put on the market.
An analysis by Reuters shows that the government reserves of member states of the International Energy Agency (IEA) could cover the current deficit for approximately 180 days. In the United States, the situation is even more complicated: part of the strategic reserve cannot be used due to infrastructure problems.
2.6 billion barrels lost since the beginning of the war
To assess how long the reserves can last, the extent of the disruption must first be determined.
Saudi Aramco's chief estimates that the world has lost 2.6 billion barrels of oil since the beginning of the war. According to Reuters' calculations, it is the largest cumulative supply disruption ever recorded, except for the one caused by the Iranian Revolution in 1979.
The quantity is equivalent to approximately 25 days of global consumption, based on the pre-war demand of 103 million barrels per day.
Most analysts estimate that the current deficit is around 5 million barrels per day. At this level, it can be calculated how long the reserves could cover the oil shortage.
On paper, it's 300 days. In reality, only 180
In March, the IEA announced the release of 400 million barrels from emergency reserves and states that there are still significant stocks. Together, government and commercial reserves amount to approximately 1.5 billion barrels, which could cover the current deficit for 300 days.
However, the IEA cannot decide on the use of commercial stocks. If only government reserves are taken into account, there are about 900 million barrels left, enough for approximately 180 days, or six months.
The IEA states that it is prepared to release additional quantities if the situation worsens.
US reserve at unprecedented levels since 1983
One-third of the remaining government reserves within the IEA are in the United States.
The oil stocks from the US Strategic Petroleum Reserve (SPR) have dropped to the lowest level since January 1983, when Ronald Reagan was president.
The issue is not only about the quantity of remaining oil.
The US Government Accountability Office, the auditing institution of the American Congress, warned in May that the infrastructure of the strategic reserve is increasingly deteriorating. Consequently, a portion of the stored oil can no longer be extracted and put on the market.
Analysts at Rapidan Energy estimate this to be over 100 million barrels, approximately a quarter of the reserves.
If the US can effectively use only 200 million barrels, this quantity would cover the current global market deficit for only 40 days.
Diesel and jet fuel, a separate issue
The pressure is not only visible in terms of oil reserves.
Christian Egeland from Energy Aspects considers a new coordinated release by the IEA unlikely, as many states have limited stocks.
Hamad Hussain from Capital Economics warns that the reduction in reserves leaves the oil market more exposed to sharp price increases if new supply problems arise.
The situation is particularly sensitive regarding diesel and jet fuel. According to Morgan Stanley, global stocks are currently at the lower end of the range of the past five years.
Refineries in the Middle East and Russia have been affected by wars, especially impacting the production of these fuels, explains Survo Sarkar from DBS Bank.
China in a much better position
The global picture seems better when all forms of stocks are considered: government reserves, commercial stocks, the American strategic reserve, China's reserves, and currently transported oil by sea.
The IEA believes that, from this perspective, the available quantities are still significant.
China is in a much better position.
Beijing does not disclose its reserves, but Energy Aspects estimates that in July, it had nearly 1.7 billion barrels of oil. At this level, the country could cover its imports for almost a year as before the war through the Strait of Hormuz, around 5.5 million barrels per day.
It is one of the most comfortable positions among the major world economies, alongside Japan.