‘This is bad’: Strategists see European oil shortages within weeks as inventories are depleted

Global oil stockpiles are plummeting and inventories may not recover until December 2027, strategists warn, with physical shortages potentially looming over Europe by the end of this month.

Jeff Currie, executive co-chairman at Abaxx Commodity Exchange, said that physical shortages could hit Europe “any day now,” and the severity of the ongoing supply crunch is not yet reflected in oil prices or policymakers’ remarks.

Speaking with CNBC’s “Squawk Box Europe” Monday, Currie said that oil supply concerns will intensify as inventories are depleted, adding that once the shortages hit, prices will go “non-linear.”

“Then we find out what the willingness is of somebody to pay for that last molecule,” Currie said.

Currie said the oil market is currently in the midst of its “shoulder months” — traditionally the weakest part of the commodity demand cycle throughout the year, coming out of the heating season and heading into the driving season.

But, with the U.S. Memorial Day and U.K.’s spring bank holidays approaching, demand for diesel, gasoline and oil will rise sharply. “That’s when you’re going to begin to feel it,” Currie said.

Oil prices jumped again on Monday as the International Energy Agency warned that stockpiles are rapidly depleting.

‘Veneer of stability’

Societe Generale analysts led by Mike Haigh, head of FIC and commodity research, said oil markets are operating under a “veneer of stability” — but the underlying system remains “acutely stressed.”

“Inventories are falling quickly, and critically, only a small share of global stocks is truly usable without pushing the system into operational stress,” analysts said in a note Monday.

Flows through the Strait of Hormuz — which typically make up about a fifth of the world’s total oil and gas supply — have been severely constrained since the U.S.-Iran conflict began on Feb. 28.

SocGen analysts said that even if the Strait were to reopen by early June, the complex physical supply chain sequence of getting more oil online — involving tanker transit, discharge, refining and distribution — still means a delay of at least 52 days.