Brent Seen Hitting $130 by June as OECD Oil Stocks Near Operational Stress Levels

OECD commercial oil inventories are on track to reach operational stress levels by early June, raising the prospect of Brent crude hitting a nominal all-time high of $130 to $140 per barrel if drawdown rates hold, according to analysts tracking the fallout from the two-and-a-half-month Strait of Hormuz closure. JPMorgan warned Wednesday that developed-world stocks could reach critically low levels within weeks. Capital Economics estimates that if the strait stays effectively closed and April's depletion pace continues, Brent will post a record nominal peak next month. The contract was trading at $110.35 early Monday after gaining more than 3% on Friday to close at $109.26, following a breakdown in U.S.-China talks on reopening the waterway. The IEA has described the disruption as the largest in oil market history. Global supply fell 1.8 million barrels per day in April, bringing cumulative losses since military action began on February 28 to 12.8 mb/d. Morgan Stanley projects the market will lose another billion barrels over 2026 due to restart delays. OPEC+'s May 3 decision to lift output by 188,000 b/d — less than 1.5% of the lost volume — has done little to shift the arithmetic. Governments and industry have released 164 million barrels from strategic reserves since the conflict began, a record drawdown that already exceeds the scale of the IEA's full planned 400-million-barrel release. Saudi Aramco has warned that gasoline and jet fuel inventories are heading into the Northern Hemisphere summer at critically low levels. Physical market stress is acute. The spot-to-futures spread widened to nearly $30 per barrel in early April, according to the EIA, a level of backwardation that signals buyers are paying a steep premium for immediate supply. Implied volatility on Brent hit 106% on March 12, compared with less than 30% before the conflict — the highest since COVID-19's onset in early 2020. April's average settled at $117 per barrel, up $46 from February, with an intraday peak of $138 on April 7. The demand side is beginning to crack. The IEA forecasts global oil consumption will contract by 420,000 b/d by end-2026, with petrochemicals and aviation hardest hit. Iraq, whose export routes run through Gulf terminals, shipped only 10 million barrels in April against 93 million the month before, the country's oil ministry reported. The strait, which handled roughly 20% of global oil before the conflict, remains closed despite a temporary Iran ceasefire. The U.S. Navy has enforced a blockade on Iranian oil since mid-April and said Monday it has intercepted more than 81 vessels. Satellite data from TankerTrackers.com indicates some sanctioned tankers are still getting through; three empty vessels with combined capacity of 1.9 million barrels recently cleared the blockade line, enough to sustain Iranian production for roughly one additional day. Some Asian countries have already introduced rationing. OECD storage data due in the final week of May will show whether June marks the inflection point analysts are pricing in. Any signal of negotiations to reopen the strait would move quickly against the steep backwardation in crude futures — the clearest remaining pressure valve in a market running low on options.