Oil Slides to $73 as Hormuz Supply Recovery Undercuts May's Crisis Premium
ICE Brent crude front-month has fallen more than $35 from its May peak as markets price a partial Hormuz reopening, but supply ledgers suggest the easing may be premature.
ICE Brent crude front-month settled at $73.08 as of Friday's close (2026-06-27), roughly $36 below the $109.26 peak reached on Friday (2026-05-15) when China offered no signal it would press Iran to restore tanker traffic through the Strait of Hormuz. The move signals that markets are pricing a partial, if incomplete, recovery of flows that had threatened to push global inventories into structural deficit.3
At the height of the disruption in mid-May, the picture was stark. The United States Energy Information Administration reported a withdrawal of nearly 10 million barrels from the US Strategic Petroleum Reserve in the week of 2026-05-11, the largest single-week SPR drawdown on record, as Washington scrambled to plug supply gaps. Kpler calculated cumulative Middle East supply losses had reached 782 million barrels as of May 8, running on pace to pass 1 billion barrels by end of that month.1,2
Saudi Arabia contributed the bulk of the shortfall, with output running more than 3 million barrels per day below pre-conflict levels; Iraq had shed 2.88 million barrels daily, Kuwait 1.75 million and Iran 1.69 million. Taken together, the regional losses ran well ahead of the International Energy Agency's May forecast of a 3.9 million barrel-per-day annual decline in global supply.2
Those losses drove the IEA to warn of inventory depletion at an unprecedented pace. Governments and industry had released 164 million barrels in aggregate by May 8, a coordinated response that covered only a fraction of the estimated 1 billion barrels already lost. The agency's full planned release of 400 million barrels would have replaced less than half of that tally.3
The speed of the retreat from May's highs suggests the market has revised its assumptions about the permanence of the Hormuz closure. Analysts in mid-May expected the strait to reopen by end of May or early June, and some tanker flows have evidently resumed enough to ease the most acute physical supply concerns.3
Morgan Stanley's analysts are less certain the recovery will be swift enough to matter for 2026 balances. The bank forecasts the market will shed a further billion barrels of supply over the course of the year as oilfields restart slowly, refinery damage is assessed and the tanker fleet is repositioned. If that projection proves accurate, $73 crude reflects an overshoot of the easing narrative rather than a fair price for physical conditions.4
Iran added its own complication in late May, cautioning against further strikes and announcing measures to tighten its control over the strait — a signal that Hormuz remains contested rather than resolved.1 NYMEX WTI front-month trades at $69.23, a discount to ICE Brent that widened as the record SPR withdrawal temporarily cushioned the domestic US market while global benchmarks bore the brunt of the disruption.
The bull case for crude rests on the gap between the resumption-of-flow narrative and the physical supply ledger. The IEA had warned that shrinking buffers amid continued disruptions may herald future price spikes rather than a sustained plateau. If Morgan Stanley's second-billion-barrel loss figure is in the right range, inventory buffers stretched in May will not replenish before year-end.3,4
What the tape has not yet fully discounted is demand destruction. Prolonged prices above $100 through May likely left marks on industrial consumption across Asia, where JKM, linked to Brent through the Atlantic LNG arbitrage chain, trades at $15.52. Refiners that curtailed run rates above $100 crude do not restore them automatically on the way back down.
The IEA's June monthly report will show whether global stock draws decelerated meaningfully in May. If inventory depletion continued anywhere near April's pace, $73 crude is resolving the crisis too early.