Shell Warns Oil Market Buffers Wearing Thin After Months of War Drawdowns
Shell's chief economist cautioned Wednesday (2026-09-16) that the resilience oil and gas markets showed during the US-Iran war may not hold as strategic reserves reach multi-decade lows.
Adam Ritchie, Shell's chief economist, said Wednesday (2026-09-16) that oil and gas markets had been "remarkably resilient" to supply disruptions caused by the US-Iran war but warned that the "shock absorbers" may now be "wearing thin," Montel reported. ICE Brent crude front-month was at $107.80 a barrel at 1009 UTC on 2026-09-16, down 0.19% on the session but close to double where many analysts had expected prices to sit this year.7
The scale of reserve consumption behind that resilience is substantial. US Strategic Petroleum Reserve stocks fell from roughly 414 million barrels at the war's start to 316.5 million barrels as of July 10 (2026-07-10), their lowest level since the first half of 1983, per EIA data. That drawdown consumed close to a quarter of the reserve in a matter of months.6,5
The global picture tells the same story. Global oil inventories stood at roughly 8.4 billion barrels at the start of 2026, but JPMorgan calculated that only around 800 million of those barrels were realistically accessible without pushing wells, pipelines, tankers and refineries into operational stress. Goldman Sachs subsequently observed that in May 2026, global inventories fell by a record 8.7 million barrels per day. The Strait of Hormuz was still largely closed when that draw was recorded.4,6
A market deficit estimated at roughly 4.0 million barrels per day through March to May 2026 was met almost entirely by drawing down stocks, OilPrice.com reported. Asian demand also collapsed: Chinese refiners slashed imports to their lowest since 2018 as high prices and disrupted Middle East flows made large-scale throughput uneconomic.5
But China's own reserve cushion is also diminishing. The country was believed to have amassed 1.3 billion barrels in strategic stockpiles before the war and has started tapping those reserves, OilPrice.com reported. Saudi Arabia rerouted an estimated 5 million barrels per day through its Red Sea export terminal, and the UAE expanded shipments through alternative port infrastructure, buying time for markets to adjust without a disorderly price spike in the war's early months.5,6
Those rerouting measures help explain why ICE Brent front-month prices did not initially move in proportion to the volume of disruption. When the Strait of Hormuz closure shut in around 14 million barrels per day, some energy analysts argued Brent should have been trading at more than double its pre-war level. Brent briefly exceeded $82 a barrel on March 1st (2026-03-01), up about 13% from February 27th (2026-02-27), before settling near $80, The Economist reported. Significant, but far below what the scale of shut-in supply would historically have implied.3,1
JPMorgan had already flagged that the global oil balance was not adding up. The bank published a note that "Something Is Off" with global oil math, observing that the Hormuz closure had not generated the price response prior disruptions of similar scale would have produced. Goldman's subsequent note pointed to May 2026's record inventory draw as evidence that markets were consuming buffers faster than prices reflected.4
UBS analysts have warned that inventory buffers have "now largely been exhausted." That marks a sharp reversal from January 2026, when many forecasters expected a crude "superglut" to push Brent toward $55 a barrel. Tighter Western sanctions and rising Gulf tensions drove roughly 20% price appreciation since the start of 2026 instead, The Economist reported.2,1
With the SPR at its lowest since the first half of 1983 and China drawing on rather than rebuilding its own stockpile, any further disruption to Hormuz flows or breakdown in the Saudi and UAE rerouting arrangements would arrive with considerably less inventory cover than markets held when the conflict began.5,6