Oil supply recovery may be slower than expected

Created at 4 Jun · 16:52 UTC3 sources↑ Market-relevant3 events

IN SHORT

Oil flows through the Strait of Hormuz may restart slower than anticipated, with meaningful recovery not expected until the second half of July. Factors like ship owner confidence, tanker availability, and well restarts could delay a full return to normal output for months.

Key Numbers

11 million barrels per dayGulf crude offline due to disruption

50th percentileToday's Brent price in inflation-adjusted terms vs. last 20 years

nearly five monthsDuration of oil field shut-in

4,000 to 5,000 wellsWells potentially facing restart constraints

75 percentLost supply expected to return within four months of Strait reopening

25 percentLost supply that may take until 2027 to return

9 million barrels a dayUS seaborne net exports of crude oil and refined products at peak

7.5 million a dayChina's seaborne net oil imports over the last 30 days

2.5 million barrels per dayScheduled SPR releases in April through June

0.7 millionScheduled SPR releases in July and August

$110 per barrelBrent forecast for Q2

$100 a barrelBrent forecast for Q3

$95Brent forecast for Q4

$85 a barrelBrent forecast for Q1 2027

Key facts

Oil flows through the Strait of Hormuz may restart slower than expected.

Meaningful export recovery through the strait is not expected until the second half of July.

Clearing safety risks in the waterway could take weeks or months.

The tanker fleet is not optimally positioned to resume lifting crude.

Restarting offline oil wells could face constraints after being shut for months.

US gasoline and diesel inventories are below five-year seasonal lows.

China's crude buying has been unusually low for April through August delivery.

Morgan Stanley's Global Commodities Strategist, Martijn Rats, discusses the potential for a slower-than-expected recovery of oil flows through the Strait of Hormuz. He notes that approximately 11 million barrels per day of Gulf crude remains offline, representing close to half of the region's pre-conflict output. Rats anticipates that meaningful export recovery will not begin until the second half of July. Several factors contribute to this projected delay: ship owners and insurers require confidence in the waterway's safety, which could take weeks or months to establish if mines remain. The global tanker fleet is also not optimally positioned, requiring time to reposition empty vessels. Furthermore, oil fields themselves need restarting after being shut for nearly five months, with an estimated 4,000 to 5,000 wells potentially facing restart constraints. While 75 percent of lost supply might return within four months of the strait's reopening, the remaining 25 percent could take until 2027. The market's current assumption of a swift recovery is seen as too optimistic, despite Brent crude falling to around $92 a barrel. Cushions like elevated inventories and strategic reserve releases are thinning. US gasoline and diesel inventories are below seasonal lows, and China's crude buying has been unusually low. Rats forecasts Brent at $110 per barrel for the second quarter, $100 for the third quarter, $95 for the fourth quarter, and $85 for the first quarter of 2027, eventually returning to $80.

Oil supply recovery may be slower than expected

PiQ Daily

Oil supply recovery may be slower than expected

PiQ Daily

Key facts

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