Asia-Pacific Oil Supply Decline of 10 Billion Barrels Intensifies Inventory Pressures

Overview

This research paper analyzes the impact on the Asia-Pacific region due to the disruption in oil supplies caused by the closure of the Strait of Hormuz. The report notes that since the onset of the conflict, oil supplies in the Asia-Pacific region have been reduced by 10 billion barrels, with the most significant decline observed in Asian imports. Despite increases in oil supplies from the U.S. and other American countries, they are insufficient to fully compensate for the missing Middle Eastern supplies. Additionally, the report highlights exacerbated inventory pressure, particularly noting that the inventory coverage of countries such as Vietnam, South Korea, and Thailand has dropped below 70 days, indicating a serious risk of shortages. Finally, the report forecasts Brent crude prices reaching $90 per barrel by 2026, suggesting potential further upward pressure should the Strait of Hormuz fail to resume operations promptly.

Core views

Key viewpoints presented in the report include: Demand-side Analysis: - From March 1 to April 30, liquid flow through the Strait of Hormuz and the Red Sea decreased by 16.4 million barrels per day, amounting to approximately a 1-billion-barrel supply loss. - Asian imports fell by 422 million barrels (roughly 7 million barrels per day), constituting the primary component of the overall supply shortfall. Supply-side Considerations: - Oil supplies from the U.S. and other Americas rose by 2.4 million barrels per day, helping mitigate some of the global supply constraints. - The absence of Middle Eastern supplies is primarily compensated for by reductions in Asian imports, consumption of floating storage, and decreases in OECD inventories. Inventories and Impacts: - Inventory coverage for Vietnam, South Korea, and Thailand has fallen below 70 days; India’s inventory loss is about 33%, whereas China and Japan maintain relatively better inventory statuses. - If the Strait of Hormuz does not reopen within the year, Brent crude prices could surpass the current projection of $90 per barrel. Overall, despite partial compensation from other regions, the market remains under considerable strain, especially in the Asia-Pacific region.

Analysis framework

The institution employed the following analytical methods: 1. Data Tracking: Detailed monitoring of changes in liquid flows through the Strait of Hormuz and the Red Sea was conducted, comparing data from 2025 to 2026. 2. National-Level Analysis: Import data from various countries were used to assess inventory pressures and coping capacities. 3. Global Balance Analysis: The increase in supplies from the U.S. and other American countries was integrated to evaluate global market supply-demand equilibrium. 4. Price Prediction: Based on shifts in supply-demand balance, future trends in Brent crude prices were forecasted. Using these approaches, the report concludes that the market is currently extremely tight, and any failure to promptly restore access through the Strait of Hormuz could lead to even higher prices.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply-demand framework

  The report analyzed disruptions in the petroleum market and their impacts on prices using the supply-demand framework.

  The supply-demand framework is a common method for assessing the state of supply and demand in specific markets. In this case, the study deduced potential price movements based on disruptions in supply and changes in demand.

• Cycle and Business Climate FrameworkInventory cycle (Kitchin)

  The report focused on changes in petroleum inventories, particularly those of OECD and non-OECD nations.

  Analyzing inventory cycles is essential for understanding market tightness. Here, changes in inventories helped assess the balance between supply and demand and potential pricing pressures.

Key data

• Total Supply Disruption10 billion barrelsLiquid flow reduced by 16.4 million barrels per day from March 1 to April 30.
• Decline in Asian Imports422 million barrelsEquivalent to a daily decrease of 7 million barrels per day.
• Increase in Supplies from the U.S. and Other Americas2.4 million barrels per dayHelped alleviate part of the supply shortage.
• Brent Crude Price Projection$90 per barrelThe expected average price for 2026 based on current supply-demand assumptions.

Impact & implications

The report suggests that the ongoing supply disruption will have far-reaching implications for the economies and markets of the Asia-Pacific region. Specifically: 1. Increased Inventory Pressure: Countries like Vietnam, South Korea, and Thailand now face inventory coverage dropping below 70 days, presenting a high risk of severe shortages. 2. Rising Fuel Prices: Further closures of the Strait of Hormuz could cause Brent crude prices to rise beyond the anticipated $90 per barrel. 3. Economic Impact: Ongoing supply tensions might drive up fuel costs, which could negatively affect economic growth.

Risks

• Long-term closure of the Strait of Hormuz leading to larger supply disruptions.
• Global economic slowdown potentially weakening demand and exacerbating imbalances.
• Policy interventions or geopolitical changes affecting market expectations.

What to watch

• Reopening timeline for the Strait of Hormuz.
• Evolution of inventory levels across different countries.
• Supply growth trends from the U.S. and other American countries.
• Actual trajectory of Brent crude prices.