Why Oil Prices Haven’t Risen More Sharply | Economic Update | Deloitte Insights

Why It Matters

The insight shows reserves are masking a real supply crunch, so a prolonged Middle East disruption could quickly raise oil prices, affecting corporate costs and inflation.

Key Takeaways

• Physical oil shortage emerges after pipeline deliveries complete.
• Global supply down 11M bpd; demand down 4M bpd.
• Reserve releases cover ~6.5M bpd, matching supply-demand gap.
• Oil price stability hinges on continued strategic reserve releases.
• Summer could trigger sharp price rise if Strait of Hormuz stays closed.

Summary

Chief economist Ira Kalish of Deloitte explains why oil prices have remained relatively stable despite a physical shortage emerging after pipeline inventories were depleted. He notes that global oil supply has fallen about 11 million barrels per day (bpd) since the Middle East crisis began, while demand has dropped roughly 4 million bpd, leaving a 7 million‑bpd gap that would normally force prices higher.

Kalish points out that the gap is being offset by an unprecedented release of strategic reserves, estimated at about 6.5 million bpd over the past month. This near‑full offset has kept the market balanced, and price movements now reflect only news about the conflict’s potential resolution rather than fundamental supply‑demand imbalances.

He adds that roughly two months of accessible reserve releases remain, taking us into the summer. If the Strait of Hormuz stays closed beyond that horizon, the market could face a sharp price surge as the reserve buffer dries up.

The analysis underscores the critical role of strategic reserve policies in moderating oil price volatility and signals that businesses should monitor geopolitical developments closely, as a sudden price spike could impact input costs and inflationary pressures.

Original Description

Oil prices have not risen as sharply as the current supply gap might suggest, and reserve releases appear to be helping cushion the market for now.

In this video, Ira Kalish, chief economist at Deloitte, examines why oil prices initially rose in anticipation of a possible shortage, how a physical supply gap emerged after oil already in the pipeline was delivered, and why reserve releases may be helping narrow the gap between supply and demand.

He also discusses how oil prices have responded to news about whether the crisis may end, what the International Energy Agency estimates about the current supply-demand imbalance, and what could happen if the Strait of Hormuz remains closed into the summer.

Executives will hear:

• Why oil prices rose before a physical shortage emerged

• How the gap between oil supply and demand developed

• Why reserve releases may be cushioning oil markets for now

• How oil prices are responding to news about the crisis

• What could happen if the Strait of Hormuz remains closed

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Topics covered in this video: oil prices, oil reserves, oil supply gap, global oil supply, oil demand, Strait of Hormuz, energy markets, crude oil prices, reserve releases, International Energy Agency, Ira Kalish, Deloitte, economic update, oil market outlook, energy price risk, business leaders, C-suite insights.

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