Global Oil Supplies Are Not Depleted, But Localized Refined Product Shortages Pose High Risk

Overview

This report provides an in-depth analysis of current shortage risks in the global oil market. Its core conclusion is that although total global oil inventories—including visible and invisible stocks, as well as crude and refined products—have not yet reached summer minimum operational levels and will not 'run out' imminently, inventory drawdowns are occurring at an alarming pace and reflect severe structural imbalances. Risks are concentrated in readily accessible refined product buffer stocks—particularly petrochemical feedstocks (naphtha, LPG) and aviation fuel. The Asia-Pacific region (excluding China) and Europe face heightened localized shortage risks.

Core views

Divergence between aggregate inventory levels and localized risk: Goldman Sachs estimates global total oil inventories currently stand at approximately 101 days of demand (DoD), expected to decline to 98 days by end-May. This level far exceeds the EU’s emergency reserve floor of 61 days and remains well above the global oil system’s estimated minimum operational storage threshold of 30–40 days. However, this aggregate figure masks substantial localized risks. Inventory disparities across regions and products—combined with export restrictions—mean surpluses in one country cannot be promptly deployed to offset shortages elsewhere. Rapid depletion of refined product inventories: Global commercial refined product inventories have fallen sharply to 45 days of demand (down from 50 days pre-war), with onshore commercial refined product stocks at just 41 days. Non-OECD refined product inventories have declined by five days of demand since February. As only ~30% of refined product inventories are visible—and data often lag—the actual degree of tightness may be underestimated. For example, Fujairah (UAE) naphtha inventories have dropped 72% since late February, while Northwest European ARA hub inventories fell 37%, underscoring extreme stress in petrochemical feedstock supply. Regional risk analysis: 1. Asia-Pacific: Although the region has offset ~70% of the Gulf refined product import shortfall by reducing exports, net crude imports into Asia-Pacific fell by 7 million barrels per day in April. Alternative suppliers have replaced less than 40% of lost Gulf crude imports. This leaves South Africa, India, Thailand, and Taiwan highly vulnerable to shortages of naphtha, LPG, jet fuel, and fuel oil. 2. Europe: European commercial jet fuel inventories (excluding government emergency reserves) may breach the IEA’s 23-day shortage warning threshold in June. The UK—facing large net import volumes—is at highest risk of jet fuel rationing. France and Germany’s commercial jet fuel coverage stands at just 16 and 17 days, respectively—both below the warning threshold. Price and newsflow signals: Diesel and jet fuel prices have declined $74/bbl and $50/bbl, respectively, since early April; regional price spreads have narrowed, indicating the initial phase of panic-driven restocking has ended and markets are shifting toward inventory drawdown. Newsflow on fuel rationing has shifted from Thailand and India to Malaysia and Bangladesh, suggesting supply pressures are spreading—but with diminishing intensity.

Analysis framework

The firm employed a four-pronged validation methodology to address data opacity in non-OECD refined product inventories: 1. Inventory tracking and estimation: Combining visible inventory data with econometric modeling to estimate invisible non-OECD refined product stocks. 2. Supply analysis: Quantifying supply shocks resulting from lost Gulf imports, then adjusting for increased imports from other regions and reduced exports, to estimate net product supply declines. 3. Price response analysis: Monitoring changes in regional physical wholesale prices to detect short-term supply-demand imbalances. 4. Newsflow aggregation: Tracking global frequency and geographic distribution of news reports referencing 'fuel rationing' as corroboration of shortage severity.

Methodology notes

• Industry/sector analysis frameworkSupply-demand framework

  Days of Demand (DoD) as the core metric for assessing supply security

  The report uses 'Days of Demand' to standardize inventory levels across countries and products, enabling cross-sectional comparison. It reflects how many days current stocks would last at prevailing consumption rates. Typically, levels below certain thresholds (e.g., IEA’s 23 days or operational 30–40 days) signal entry into danger zones.

• Industry/sector analysis frameworkUpstream-midstream-downstream transmission

  Liquidity mismatch between crude oil and refined products

  The report highlights that even with relatively stable global crude inventories, uneven refinery capacity distribution and logistical constraints prevent crude surpluses from being timely converted into refined products needed in specific regions. This 'liquidity gap'—a failure of upstream resources to translate into downstream products—is central to localized shortages.

• Industry/sector analysis framework

  Estimation model for visible vs. invisible inventories

  To address the fact that ~90% of non-OECD refined product inventories are invisible, the report applies an econometric model that leverages observable non-OECD crude inventories and country-specific 'refined-to-crude inventory ratio' estimates—enhancing accuracy in gauging true global inventory levels.

Key data

• Global Total Oil Inventories101 Days of Demand (DoD)Current estimate; projected to fall to 98 days by end-May
• Minimum Operational Storage Level30–40 Days of DemandEstimated lower bound required for normal global oil system operations
• Onshore Commercial Refined Product Inventories41 Days of DemandInventories closest to end consumers; non-OECD portion declined by five days since February
• Fujairah (UAE) Naphtha Inventory Change-72%Decline since late February, reflecting petrochemical feedstock stress
• European Commercial Jet Fuel Inventory Warning Threshold23 DaysIEA critical threshold; commercial inventories in multiple European countries already below this level
• Asia-Pacific Net Crude Import Decline (April)7 Million Barrels/DayAlternative suppliers replaced less than 40% of lost Gulf crude imports
• Diesel Price Change-$74/BarrelAverage decline since early April
• Jet Fuel Price Change-$50/BarrelAverage decline since early April

Impact & implications

The report concludes that while systemic global oil exhaustion is unlikely, localized refined product shortages could trigger price volatility and supply chain disruptions. Emerging-market Asian nations and Europe—both heavily import-dependent—will face acute challenges during the summer peak demand season. Investors should monitor price premiums for products in countries and regions where inventories are critically low and difficult to replenish quickly via trade. Additionally, evolving newsflow shows shortage hotspots migrating—indicating that supply shocks exhibit both dynamism and diffusion.

Risks

• Gulf export restoration delayed beyond expectations (e.g., pushed to July)
• European refineries fail to effectively reconfigure output to increase jet fuel production
• Errors in estimating invisible inventories lead to misjudgment of actual shortage severity
• Government policy interventions (e.g., price caps, export restrictions) distort market signals

What to watch

• Whether European commercial jet fuel inventories fall below the 23-day warning threshold in June
• Changes in fuel rationing newsflow in Malaysia and Bangladesh
• Recovery of naphtha inventories at Fujairah (UAE) and the European ARA hub
• Subsequent trends in Asia-Pacific net crude import volumes and stability of alternative supply sources