Much of the wiggle room created by weaker demand, increased production outside the Middle East and crude reserve inventory drawdowns "has now been used up," International Monetary Fund said Wednesday in a social media post.
Despite enduring one of the largest disruptions to the global oil market in decades amid the ongoing military conflict between the US and Iran, oil prices remain far lower than many experts had feared.
As tensions once again escalated along the Strait of Hormuz, which accounted for one-fourth of global maritime oil trade, the IMF noted that its closure has prevented 20 million barrels of oil per day from reaching the market.
They estimated that by the end of May, 1.1 billion barrels of crude oil, or about 10 days of typical global consumption, had failed to reach the market, a scale of disruption that exceeds the 1973 oil shock, the Iran-Iraq war and the Gulf War.
Looking ahead, the IMF warned that a recovery will not be immediate even if navigation through the Strait of Hormuz is fully restored.
Citing industry estimates, they said it could take anywhere between two and three months before flows could return to normal, after the strategically crucial Strait is fully reopened.
The fund said rebuilding global inventories and diversifying both energy supplies and transport routes will be essential to improving resilience against future shocks.