Oil price plunge coincides with warnings of a "supply crisis": Is the market wrong?
2026-05-25 15:21:12
Senior market strategist Jeff Currie said on Monday (May 25) that the Asian oil market is nearing its lowest operating levels, Europe may follow suit, and the United States may face a shortage in July, highlighting the global energy shock triggered by the war with Iran.
Carlyle Group's Chief Energy Pathway Strategy Officer and Co-Chairman of Abaxx Markets, Dr. Currie, pointed out that overall global inventory figures can be misleading because a large portion of the world's oil reserves is not immediately usable. Most of this oil is used to maintain the safe operation of pipelines and storage systems, with only a small fraction available to the market. Currie stated that Asia is approaching these so-called "minimum operating levels."
Global oil markets have been under pressure since the outbreak of the Iran-Iraq War earlier this year, which disrupted shipping through the Strait of Hormuz and led to a sharp decline in Middle Eastern energy exports. “We’ve seen a surge in refined product prices. Jet fuel prices have fallen, but diesel prices have risen above jet fuel. So the problem in Singapore continues, only it has shifted from jet fuel to diesel,” Curry said. Europe could begin to experience similar tensions in the coming weeks, as the current easing of oil flows from the US is likely temporary, and the summer driving season is approaching. “I would say Asia has reached a tipping point. Europe, give it about another month, and the US could have problems in July,” Curry said.
“All the stockpiles pulled from the U.S. Strategic Petroleum Reserve were exported to Europe, so Europeans thought they had no problem because they received all this oil imported from the U.S., but this situation cannot continue,” he added. His remarks came after the International Energy Agency recently warned that the global oil market could face a severe supply crunch during the summer peak consumption season, especially if Middle Eastern exports fail to recover and inventories continue to decline.
“If we don’t see any improvement in the situation, we could enter the red zone in July or August,” International Energy Agency Executive Director Fatih Birol warned last week.
Curry rejected proposals such as suspending the U.S. federal gasoline tax, arguing that these measures would not address the fundamental supply shortage. "This won't solve anything. The only way to solve this is to increase the availability of physical oil," he said.
While the release of U.S. strategic petroleum reserves provided some relief, Curry stated that market pricing indicates the underlying shortage remains severe. Ultimately, reopening the Strait of Hormuz remains the only lasting solution, although even then, the market will need time to normalize.
Curry believes that the continued decline in global inventories is actually increasing Iran's bargaining power in negotiations.
US President Trump on Sunday asked his team not to rush into a deal with Iran to end the war and reopen the Strait of Hormuz.
“Every day that goes by, Iran’s bargaining leverage increases. Why? Because of its oil stocks and the continued decline in reserves,” he said. “Just when you think you’ve won, that’s when you might have already lost, and their negotiating position right now is the strongest it’s been in 47 years.”
On the very day Curry warned that "Asian oil markets have hit rock bottom, Europe is about to follow suit, and the US will face a shortage in July," the market moved in a seemingly contradictory direction. Currently, US crude oil futures have fallen below the $92 mark, trading at $91.36 per barrel, while Brent crude oil futures have fallen below $100, trading at $98.40 per barrel, both down more than 5%.
The market seems unconvinced by Curry's warning that "oil tanks are bottoming out." On the surface, the plunge in oil prices and the rise in risk assets appear to contrast sharply with the impending supply crisis. However, a deeper understanding of Curry's logic reveals that the two are not contradictory, but rather a misalignment between "short-term sentiment" and "medium-term fundamentals."
The Driving Force Behind the Oil Price Crash – The “Optimistic Premium” in US-Iran Negotiations: The immediate trigger for the oil price plunge was Trump's statement last weekend that a US-Iran deal was “basically agreed upon,” immediately pricing in expectations that the Strait of Hormuz might reopen. As Curry himself pointed out, “with each passing day, Iran’s bargaining chips increase,” as global inventories continue to deplete. The market’s short-term optimism is built on the expectation of an imminent agreement, rather than on improved fundamentals.
Curry's core warning—inventory structure is more important than total volume: Curry's emphasis on "minimum operating levels" is a crucial concept overlooked by the market. Of the seemingly massive global inventories, the majority are "unavailable" operational reserves, with a very small percentage truly usable to buffer supply shocks. International Energy Agency data shows that global watch inventories decreased by 117 million barrels in April alone. Even if the Straits Times reopen tomorrow, restoring supply confidence and restarting production will take months.
A "structural signal" in the refined oil market: Curry observed a key shift—Singapore's problem has shifted from jet fuel to diesel, with diesel prices now surpassing jet fuel prices. This is a signal that supply shortages are permeating industrial fuels, a situation far more alarming than crude oil prices themselves.
Curry's real point is that the market might gain a few days of respite through "agreement expectations," but inventories don't lie. With Asia having already bottomed out, Europe having a month left, and the US facing substantial shortages in two months, any significant pullback in oil prices could be a "bear trap" in the medium-term fundamentals.
In conclusion, Curry's warning highlights the stark reality facing the global oil market: Asia has reached its lowest operating levels, followed closely by Europe and the United States. Despite positive signals from the US-Iran negotiations, the Strait of Hormuz remains closed, global inventories continue to decline, and Iran's bargaining power is actually increasing. The structural tensions in the refined product market (from jet fuel to diesel) further underscore the depth of the supply shortage.
In the short term, the only lasting solution is the reopening of the Strait of Hormuz, but even if an agreement is reached, market normalization will take time. Oil prices are expected to remain volatile at high levels, with the direction depending on the evolution of the geopolitical situation.
At 15:20 Beijing time on May 25, US crude oil futures were trading at $92.51 per barrel.
Carlyle Group's Chief Energy Pathway Strategy Officer and Co-Chairman of Abaxx Markets, Dr. Currie, pointed out that overall global inventory figures can be misleading because a large portion of the world's oil reserves is not immediately usable. Most of this oil is used to maintain the safe operation of pipelines and storage systems, with only a small fraction available to the market. Currie stated that Asia is approaching these so-called "minimum operating levels."
Refined oil market: Singapore's problems shift from aviation fuel to diesel.
Global oil markets have been under pressure since the outbreak of the Iran-Iraq War earlier this year, which disrupted shipping through the Strait of Hormuz and led to a sharp decline in Middle Eastern energy exports. “We’ve seen a surge in refined product prices. Jet fuel prices have fallen, but diesel prices have risen above jet fuel. So the problem in Singapore continues, only it has shifted from jet fuel to diesel,” Curry said. Europe could begin to experience similar tensions in the coming weeks, as the current easing of oil flows from the US is likely temporary, and the summer driving season is approaching. “I would say Asia has reached a tipping point. Europe, give it about another month, and the US could have problems in July,” Curry said.
The export of US strategic petroleum reserves is unsustainable.
“All the stockpiles pulled from the U.S. Strategic Petroleum Reserve were exported to Europe, so Europeans thought they had no problem because they received all this oil imported from the U.S., but this situation cannot continue,” he added. His remarks came after the International Energy Agency recently warned that the global oil market could face a severe supply crunch during the summer peak consumption season, especially if Middle Eastern exports fail to recover and inventories continue to decline.
“If we don’t see any improvement in the situation, we could enter the red zone in July or August,” International Energy Agency Executive Director Fatih Birol warned last week.
Solution: Only by increasing physical supplies and reopening the Strait of Hormuz.
Curry rejected proposals such as suspending the U.S. federal gasoline tax, arguing that these measures would not address the fundamental supply shortage. "This won't solve anything. The only way to solve this is to increase the availability of physical oil," he said.
While the release of U.S. strategic petroleum reserves provided some relief, Curry stated that market pricing indicates the underlying shortage remains severe. Ultimately, reopening the Strait of Hormuz remains the only lasting solution, although even then, the market will need time to normalize.
Curry believes that the continued decline in global inventories is actually increasing Iran's bargaining power in negotiations.
Iran's negotiating leverage has increased, and Trump has instructed his team not to rush into a deal.
US President Trump on Sunday asked his team not to rush into a deal with Iran to end the war and reopen the Strait of Hormuz.
“Every day that goes by, Iran’s bargaining leverage increases. Why? Because of its oil stocks and the continued decline in reserves,” he said. “Just when you think you’ve won, that’s when you might have already lost, and their negotiating position right now is the strongest it’s been in 47 years.”
On the very day Curry warned that "Asian oil markets have hit rock bottom, Europe is about to follow suit, and the US will face a shortage in July," the market moved in a seemingly contradictory direction. Currently, US crude oil futures have fallen below the $92 mark, trading at $91.36 per barrel, while Brent crude oil futures have fallen below $100, trading at $98.40 per barrel, both down more than 5%.
Market conditions appear to contradict Curry's warnings.
The market seems unconvinced by Curry's warning that "oil tanks are bottoming out." On the surface, the plunge in oil prices and the rise in risk assets appear to contrast sharply with the impending supply crisis. However, a deeper understanding of Curry's logic reveals that the two are not contradictory, but rather a misalignment between "short-term sentiment" and "medium-term fundamentals."
The Driving Force Behind the Oil Price Crash – The “Optimistic Premium” in US-Iran Negotiations: The immediate trigger for the oil price plunge was Trump's statement last weekend that a US-Iran deal was “basically agreed upon,” immediately pricing in expectations that the Strait of Hormuz might reopen. As Curry himself pointed out, “with each passing day, Iran’s bargaining chips increase,” as global inventories continue to deplete. The market’s short-term optimism is built on the expectation of an imminent agreement, rather than on improved fundamentals.
Curry's core warning—inventory structure is more important than total volume: Curry's emphasis on "minimum operating levels" is a crucial concept overlooked by the market. Of the seemingly massive global inventories, the majority are "unavailable" operational reserves, with a very small percentage truly usable to buffer supply shocks. International Energy Agency data shows that global watch inventories decreased by 117 million barrels in April alone. Even if the Straits Times reopen tomorrow, restoring supply confidence and restarting production will take months.
A "structural signal" in the refined oil market: Curry observed a key shift—Singapore's problem has shifted from jet fuel to diesel, with diesel prices now surpassing jet fuel prices. This is a signal that supply shortages are permeating industrial fuels, a situation far more alarming than crude oil prices themselves.
Curry's real point is that the market might gain a few days of respite through "agreement expectations," but inventories don't lie. With Asia having already bottomed out, Europe having a month left, and the US facing substantial shortages in two months, any significant pullback in oil prices could be a "bear trap" in the medium-term fundamentals.
The global oil market faces a severe supply gap, with geopolitical tensions continuing to exert pressure.
In conclusion, Curry's warning highlights the stark reality facing the global oil market: Asia has reached its lowest operating levels, followed closely by Europe and the United States. Despite positive signals from the US-Iran negotiations, the Strait of Hormuz remains closed, global inventories continue to decline, and Iran's bargaining power is actually increasing. The structural tensions in the refined product market (from jet fuel to diesel) further underscore the depth of the supply shortage.
In the short term, the only lasting solution is the reopening of the Strait of Hormuz, but even if an agreement is reached, market normalization will take time. Oil prices are expected to remain volatile at high levels, with the direction depending on the evolution of the geopolitical situation.
At 15:20 Beijing time on May 25, US crude oil futures were trading at $92.51 per barrel.
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