Global Inventory Draws Hit 8.7 Million Barrels Daily as Aluminum and Oil Face Prolonged Supply Outages

Global Inventory Draws Hit 8.7 Million Barrels Daily as Aluminum and Oil Face Prolonged Supply Outages The fastest inventory depletion on record is converging with power grid failures across Asia and commodity supply disruptions that stretch far beyond crude oil. Global draws from oil inventories have been running at 8.7 million barrels daily since the start of May, the highest rate on record, Goldman Sachs analysts said. The investment bank warned that while inventories were unlikely to hit minimum operational levels this summer, the speed of depletion and supply losses in some regions and products is concerning, with stocks nearing critical thresholds. The aluminum market faces what analysts described as a "serious and prolonged supply outage" driven by the same Hormuz-related energy disruptions affecting oil and gas.⁷ That matters because the commodity supply crisis is no longer confined to hydrocarbons. The Iran war is roiling commodities far beyond oil, the Economist reported. Miners from Indonesia and Africa involved in copper and nickel processing are scrambling for alternatives to Gulf-routed supply chains. Yara's chief executive Svein Tore Holsether warned that a prolonged Hormuz closure would be "catastrophic" for food supply, with spring planting season at risk from fertiliser shortages.⁴ The Strait of Hormuz closure has shut approximately a fifth of the world's daily oil and LNG supply. Top Middle East producers Saudi Arabia, Iraq and Kuwait have been cut off from export routes. The International Energy Agency planned to recommend releasing 400 million barrels, the largest such intervention in IEA history, to absorb the shock.⁶ Europe faces a tightening supply situation as the war derails key oil and gas exports. Analysts told Montel the continent would face a much tighter energy market from April onward, though government-led policy should mitigate the worst of the crunch.² The power grid dimension amplifies the commodity squeeze. Global power grids are facing their biggest test in decades, with electricity generation strangled across the world's largest economies by a convergence of war, drought, production shortages, historically low inventories and pandemic backlash. Asia's heatwave has caused hours-long daily blackouts, putting more than 1 billion people at risk across Pakistan, Myanmar, Sri Lanka and India, with little relief in sight.³ In India, power shortages in many states are approaching levels last seen in 2014, when they were estimated to have shaved about 5 percent off GDP. That would mean a reduction of almost $100 billion should the outages become more widespread and persist through the year. Power shortages reduce industrial output, which in turn affects demand for aluminum, steel and other energy-intensive metals in the world's fastest-growing major economy.³ Moldova illustrates the grid vulnerability at the European periphery. Russian strikes in southern Ukraine disconnected a key 400 kV power line linking the country with Romania, creating a supply shortfall that had significant consequences for the small nation's energy security, a consultant told Montel.¹ The LNG supply outlook compounds the problem. Around 12.8 million tonnes of annual LNG capacity could remain offline for three to five years, analysts estimated. Before the conflict, the consensus was that LNG supply would grow strongly through 2026. That assumption is gone. Prices are expected to stay elevated for several years rather than moderating.⁵ China's rare earth export restrictions add another supply chain pressure point. Shipments of heavy rare earths remain drastically suppressed, with dysprosium, terbium and yttrium exports running at just 41, 49 and 42 percent of pre-restriction levels respectively. China accounts for approximately 70 percent of US yttrium supply and 100 percent of terbium, holmium and lutetium. The Pentagon purchased $400 million in preferred stock in MP Materials to accelerate domestic rare earth production, while USA Rare Earth signed a letter of intent to access $1.6 billion in government funding.⁸ What to watch is whether the 8.7 million barrel daily draw rate accelerates or moderates in the coming weeks, and whether Asian power shortages force industrial demand destruction large enough to offset the supply losses — the only mechanism that can rebalance markets when physical barrels are not available.^7,3