Oil markets may face moment of truth in June. Brace for a 'non-linear' price spike and panic buying

Key Points:

• Oil inventories in developed countries are rapidly depleting, with JPMorgan warning they may reach operational stress levels by early June and Saudi Aramco cautioning about critically low gasoline and jet fuel stocks ahead of summer.
• The International Energy Agency reported a record pace of oil inventory drawdowns, with 164 million barrels released by governments and industry as of May 8, signaling potential future price spikes due to shrinking buffers amid ongoing supply disruptions.
• The Strait of Hormuz remains effectively closed due to continued Iranian attacks and a U.S. naval blockade, delaying expectations for its reopening and exacerbating supply shortages that could push Brent crude prices above $130-$140 a barrel by next month.
• Despite current oil futures not hitting extreme highs, this is supported by existing sea supplies, strategic reserve releases, and reduced Chinese imports; however, these buffers are finite and cannot sustain prolonged depletion without severe market consequences.
• Analysts warn that if the Strait remains closed, oil prices may experience volatile, non-linear increases driven by panic buying and demand rationing, with inventories nearing record lows and the risk of economically damaging supply shocks growing.