1.1 billion barrels gone: IMF warns that global oil market is running out of safety cushions

The global oil market faced a disruption that could have sent crude prices soaring. The effective closure of the Strait of Hormuz cut off around 20 million barrels a day of crude and refined products — roughly one-fifth of global consumption. Yet after an initial spike, oil prices settled around $90-$100 a barrel.

The reason, according to an International Monetary Fund (IMF) analysis published on July 15, 2026, is that the global energy system had several shock absorbers. But those buffers have now been significantly depleted.

Why didn’t oil prices explode? 

The disruption was enormous. Gulf producers were able to reroute some supplies. Saudi Arabia used its pipeline to Yanbu on the Red Sea, while the UAE pushed its Fujairah export facilities close to capacity. But these alternatives could replace only a fraction of the oil normally moving through Hormuz.

Refined fuel supplies were also hit, particularly diesel and jet fuel. Gulf countries account for around 10% of global supply of these products.

By the end of May, more than 1.1 billion barrels of crude had failed to reach the market—equivalent to roughly 10 days of normal global consumption. The shortfall was larger than those recorded during the 1973 oil shock, the Iran-Iraq war and the Gulf War.

So how did the market cope?

Three buffers kept the market supplied

1. Oil demand fell: Higher prices encouraged consumers and businesses, particularly in Asia, to reduce oil consumption and switch towards alternatives such as coal and renewable energy. Transport demand, however, proved harder to cut. Fuel subsidies, price caps and tax rebates helped limit the impact on consumers — but increased pressure on government finances.

2. Producers outside the Gulf increased output: Oil production outside the Gulf rose by nearly 2 million barrels a day compared with 2025 levels. The United States led the increase, while Venezuela, Guyana and Russia also contributed additional supply. This extra production helped compensate for part of the missing Gulf output.

3. The world dipped into its oil stocks: This was arguably the most important buffer. The market faced a deficit of about 4 million barrels a day between March and May. Global inventories — including China's commercial stocks and strategic reserves — covered almost all of that gap.

In other words, the world did not eliminate the supply shock; it largely used stored oil to absorb it.

Bigger worry: those buffers are running out 

This is where the IMF's warning becomes more important. Before the war, global oil supply was running about 2 million barrels a day above demand, giving the market some breathing room.

That surplus has now been eroded. Spare production capacity has been deployed, consumption has already adjusted and inventories have been drawn down.

That leaves the global oil system with less protection against another disruption. And even if the Strait of Hormuz fully reopens, the recovery may not be immediate.

Industry estimates suggest that it could take two to three months for a significant share of oil flows to resume after a full reopening. Shipping arrangements, insurance and operator confidence would also need time to recover.

Prolonged production shutdowns could create a longer-term problem if some wells cannot be restarted economically.

What happens if another shock hits? 

The key concern is inventories. As supply gradually recovers, the oil deficit will continue to drain stocks until inventories approach operational minimums — the point at which the physical oil system itself starts to come under strain.

That means another major disruption could have a very different impact from the initial war shock. With fewer barrels in storage and less spare capacity available, even a smaller supply interruption could trigger a sharper price response.

What does the IMF recommend? 

The IMF highlights three broad lessons.

• First, rebuild inventories. Strategic and commercial stocks need to be replenished so the global market has a buffer against future disruptions. 
• Second, reduce dependence on single chokepoints. The Strait of Hormuz remains critical to global energy flows. Diversifying both supply routes and energy sources — including renewables — can reduce that vulnerability. 
• Third, make consumer support targeted and temporary. Broad fuel subsidies and price interventions can protect consumers during a crisis but can also strain government finances and weaken incentives to conserve energy. 

The oil market managed to absorb an extraordinary wartime supply shock — but not because the disruption was small. It was because demand fell, producers outside the Gulf pumped more and the world drew heavily on its oil reserves.