The head of Saudi Arabian oil giant Aramco said global oil inventories, which have thinned out considerably, could take as long as two years to rebuild to more comfortable levels.
The Strait of Hormuz, the narrow waterway between Iran and the Arabian Peninsula, normally carries roughly a fifth of the world's oil shipments on their way from Gulf producers to refineries around the globe. Any disruption to flows through the strait tends to ripple quickly through global energy markets, since there are few easy alternative routes for moving that much crude and refined fuel by sea. Oil inventories around the world had already been running lean heading into this year, leaving less of a buffer to absorb any new shock to supply.
According to Monday's trading commentary, crude flows through Hormuz have recovered to about 76 percent of levels seen before recent disruptions, but diesel supplies remain scarce. In response to tight fuel supplies, President Trump signed an order opening up tax-free red-dyed diesel, normally reserved for off-road and agricultural use, to all buyers. Patrick De Haan, an analyst at GasBuddy, said the move was unlikely to meaningfully lower prices at most pumps, since red diesel represents a small share of overall diesel demand nationwide.
The combination of a slow inventory rebuild and persistent diesel tightness suggests energy markets will stay sensitive to any further developments in the region, including the Yemen conflict and broader Gulf shipping security, for some time to come. Analysts are also watching how refiners in Asia and Europe adjust their own purchasing in response to the tighter diesel market.
Whether Hormuz crude flows continue to recover toward prewar levels, and whether diesel markets ease as refiners adjust output.
Why is the Strait of Hormuz so important to oil markets?
It is the main route for roughly a fifth of the world's oil shipments, so any disruption there affects global supply quickly.
Will Trump's diesel order lower gas prices?
Analysts say it is unlikely to meaningfully lower prices at most pumps, since the diesel it affects is a small share of total demand.