On Monday, May 11, Brent crude oil futures prices hovered around $104 per barrel, up about 66% from the beginning of the year. Despite the Middle East supply disruptions entering their 11th week and the closure of the Strait of Hormuz leading to a significant contraction in seaborne crude oil supply, oil prices did not experience a historic surge. The futures curve shows that the market has not fully priced in this unprecedented supply shock. On the fundamental side, US crude oil exports continue to reach record highs, and some importers have effectively buffered the impact through inventory reduction and cautious purchasing. While global visible inventories are being reduced at an accelerated pace, this has not yet triggered demand destruction. The latest tanker tracking data shows that net seaborne exports from the seven largest Middle Eastern producing countries have plummeted year-on-year. The global oil market remains relatively calm thanks to the buffering mechanism. This article will analyze the supply and demand dynamics behind this anomaly.

Scale of supply shock under the closure of the Strait of Hormuz

The closure of the Strait of Hormuz has lasted for over 10 weeks, becoming the largest crude oil supply disruption in recent years. Even if the conflict ends tomorrow, the resumption of production and tanker repositioning will still result in an additional loss of approximately 1 million barrels per day of supply for the remainder of 2026. Latest tanker data shows that the net seaborne exports of the seven largest Middle Eastern producers (Saudi Arabia, the UAE, Kuwait, Iraq, Iran, Qatar, and Bahrain) have decreased by 12.3 million barrels per day year-on-year over the past 30 days. This figure far exceeds the impact of any previous single geopolitical event. However, the futures market has only priced Brent crude at a level 66% higher than at the beginning of the year, well below the historical highs of the normal range seen between 2011 and 2014, and not reaching the peaks seen during the global financial crisis or the pandemic.

Traders widely question whether futures markets are underestimating real risks. Some commentators point out that traders may still be hoping for a swift reopening of the Straits, ignoring the lengthy recovery period required for logistics. However, a deeper reason lies in the fact that global oil inventories were already high before the crisis, making their buffering capacity significantly stronger than previous shocks. The latest global inventory data shows that although inventories outside the Middle East are declining rapidly, the overall system has not yet reached a state of tight balance.

Supplier	Year-on-year change in net seaborne exports (10,000 barrels/day)
The Seven Middle Eastern Countries	-1230
USA	+380
Other producing countries combined	+170
Global net contraction	-680

This table shows that the United States alone contributed nearly a third of the losses in the Middle East, while the increases from other producing countries were relatively limited.

The buffer effect of surging US exports

The United States has become the most critical buffer in this supply shock. The latest export data shows that net U.S. seaborne crude oil and refined product exports have jumped from 5.2 million barrels per day in the same period last year to 8.9 million barrels per day, an increase of 3.8 million barrels per day, far exceeding the combined changes of other countries such as Canada and Russia. Morgan Stanley analysts point out that this surge in exports is "overwhelmingly a single-country story." While U.S. domestic crude oil production has not increased significantly, the release of strategic petroleum reserves and the movement of commercial inventories have jointly supported the export expansion.

However, this buffer is not without cost. The latest weekly data from the U.S. Energy Information Administration shows that diesel inventories have fallen to their lowest level for this time of year since 2005, gasoline inventories are below the five-year seasonal range, and crude oil inventories have also seen a significant reduction. While the export valve remains open, inventory pressure is gradually accumulating. If the closure of the Strait continues beyond expectations, U.S. export capacity may face challenges, at which point WTI crude oil may need to achieve a rebalancing by "retaining domestic production" at higher prices.

Inventory reduction strategies of major importers

Corresponding to the supply-side buffer, the destocking behavior of major Asian importers has become another pillar of the market's soft landing. The latest tanker tracking data shows that net seaborne imports by Asian buyers decreased by 10.9 million barrels per day compared to the same period last year. This adjustment exceeds the global net supply contraction, effectively acting as an excess buffer. Importers did not reject long-term contract cargoes, but rather resold some spot cargoes to the Atlantic basin. This operational model is a typical example of inventory-driven destocking: maintaining supplier relationships while halting their own inventory accumulation.

Satellite data and tanker flows indicate that importers' inventories were high at the beginning of the year, and while they are currently being reduced, they still provide a buffer for several months. Morgan Stanley believes that even if the reduction rate reaches millions of barrels per day, key import markets may still maintain the current low import levels until the end of the year. It is this cautious purchasing and inventory release that has together pulled the global oil market back from a potential crisis to a relatively stable range.

Foresight and potential risks of price path

Morgan Stanley's baseline scenario assumes the Strait of Hormuz will reopen next month, restore 70% of pre-conflict traffic by the end of August, and achieve full normalization by November. Under this path, Brent crude will not face additional pricing pressure. However, if the buffers provided by the US or importers run out by the end of June or July, the market will enter a completely new regime: Asian buyers will return to the spot market, while a significant supply gap will persist in the Middle East, making demand disruption an inevitable option.


In this scenario, considering complex refining margins, refined product prices entering a demand-disruption phase would push Brent crude up to $130-150 per barrel. It's worth noting that this price level is not hypothetical; spot Brent crude briefly touched $141 per barrel on April 6th. The difference is that any current rebound quickly faded following ceasefire rumors, while in the extreme scenario, prices would need to remain high to achieve a supply-demand rebalancing.