A warning from the finance chief of Norwegian energy giant Equinor suggests the global oil market faces at least six months of disruption to normalize flows through the vital Strait of Hormuz, a scenario that threatens to keep crude prices elevated and fuel global economic uncertainty.
Brent crude, the global benchmark, held above $100 a barrel after the finance chief of Norwegian energy giant Equinor ASA said it would take a minimum of six months for the Strait of Hormuz to return to normal following a major supply disruption. The assessment introduces a prolonged period of uncertainty for a market already grappling with what one report calls a "double depletion" of inventories and demand.
"If Hormuz were to be reopened, it would take an additional 7 months at minimum to fully restore upstream production," Torgrim Reitan, Chief Financial Officer of Equinor, said on Wednesday. Reitan's comments came as the company reported stronger-than-expected first-quarter profits, buoyed by the same higher oil prices and production tailwinds causing stress elsewhere in the global economy.
The market is contending with a supply loss of 15 million barrels per day, a figure that is rapidly draining global stockpiles. According to a recent analysis from S&P Global Energy, crude inventories fell by nearly 200 million barrels in April alone, a draw rate of about 6.6 million barrels per day. The second quarter is on pace for the largest quarterly inventory draw on record, averaging about 5.5 million barrels per day, even as global liquids demand is projected to contract by nearly 5 million barrels per day from a year ago.
"That the cumulative supply loss is now approaching 1 billion barrels is a staggering figure that inventories cannot cover indefinitely," said Jim Burkhard, vice-president at S&P Global Energy. "An inevitable market reckoning is coming."
'Double Depletion' Grips Market
The dynamic of falling demand failing to offset a larger supply shock has created a precarious situation. While Brent crude has traded above $100 per barrel since mid-March, analysts note this is not an extreme price by historical standards when adjusted for inflation. The 2011 average of $111 per barrel, for instance, would be roughly $160 in today's money, suggesting prices have room to run higher as the physical market tightens.
The S&P report warns that the full impact of the supply disruption has been cushioned by inventory draws, but this buffer is finite. The longer the strait remains closed, the more likely the supply crisis extends into late 2026 and 2027, forcing prices for crude and refined products significantly higher.
A Stagflation Shock in the Making?
The ripple effects of the energy shock are already threatening to derail global economic growth and fan inflation, raising the specter of stagflation. The disruption to oil flows is a primary driver of this risk, impacting everything from consumer prices in energy-importing nations like India to the operational stability of entire industries.
Airlines have been forced to axe more than 13,000 flights in a single month over fears of "critically low" jet fuel supplies, a direct consequence of the turmoil. Two key indicators to watch, according to S&P, are U.S. crude stock levels and the buying behavior of major importers like China. A significant increase in U.S. exports or a surge in Chinese purchasing would signal that the global supply crunch is intensifying, likely heralding a new spike in prices.
This article is for informational purposes only and does not constitute investment advice.