Oil: Demand destruction is buying time

Despite the renewed hostilities with Iran and the disruption to oil supplies, Brent remains below its 2026 high reached in April. Today’s graph helps explain why: weaker demand has absorbed roughly one quarter of the supply shock.

The coordinated release of strategic reserves has also cushioned the impact. However, this buffer is becoming thinner: the US Strategic Petroleum Reserve is at its lowest level since 1983, while commercial crude inventories remain below their five-year average.

The market is therefore balancing weaker consumption against an increasingly fragile supply situation. Should the conflict persist and flows through the Strait of Hormuz remain disrupted, a sustained return above $100 per barrel would be entirely plausible.