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Global Rebalancing Offset Oil Supply Shock, Kpler Says

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The global oil market has largely absorbed what initially appeared to be a near-20 million barrels-per-day disruption following the closure of the Strait of Hormuz, with prices and refining margins easing despite continued constraints on flows in the Middle East, according to a Thursday note from Kpler.

Kpler analyst Sumit Ritolia said the expected supply shock has been offset through a mix of demand destruction, inventory draws, strategic stock releases, and large-scale trade re-routing. The result has been a rapid rebalancing rather than sustained price escalation.

China has emerged as the key swing factor, with seaborne crude imports falling to a decade low of 6.7 mmb/d in May, sharply reducing regional competition for barrels.

At the same time, global refinery runs are estimated to have been about 5.6 mmb/d below pre-crisis expectations between March and May, significantly cutting crude demand.

On the supply side, exporters have adapted quickly. Combined shipments through Saudi Arabia's Yanbu terminal and the UAE's Fujairah hub have increased by roughly 3.7 mmb/d as producers maximize alternative export routes, including pipelines bypassing Hormuz.

West of Suez exports have risen by 3.2 mmb/d, with flows to Asia up 2.5 mmb/d despite sharply wider arbitrage spreads, underscoring security-of-supply-driven trade flows.

Inventory measures have also played a key role. The OECD and partners, including the US and Japan, have released emergency stocks, while commercial inventories and oil-on-water volumes have been drawn down to bridge immediate gaps.

The adjustment has been reinforced by refinery run cuts across Asia, the Middle East, and parts of Russia, partially offset by higher utilization in the Americas and select emerging markets.

Despite the apparent stabilization, Kpler cautions that the balance is being maintained through finite mechanisms. Strategic reserves, unusually low imports, and inventory depletion cannot be sustained indefinitely. The current equilibrium reflects adaptation under constraint rather than a return to normal market flexibility.

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