Although oil prices have risen above $100 per barrel, they have not surged toward $150, supported by a triple buffer of inventory drawdowns, the release of spare capacity, and weakening demand. However, these buffers are rapidly depleting, and systemic vulnerability continues to rise. If the blockade persists, once the safety margins provided by inventories and spare capacity disappear, oil prices could enter a true reassessment phase.
The blockade of the Strait of Hormuz has lasted for approximately three months. Although international oil prices have surpassed $100 per barrel, they remain far below the $150 threshold previously projected by many analysts. This seemingly calm market performance does not indicate that the supply shock has been absorbed; rather, the global oil system is 'buying time' through a triple buffer of inventories, spare capacity, and declining demand. Once these buffers are exhausted, the real impact on oil prices may only just begin.
Oil prices have risen significantly, yet current levels remain below the peak seen after the Russia-Ukraine conflict erupted in 2022 and are far from the historical highs reached prior to the 2008–2009 global financial crisis. The market’s apparent orderly functioning masks a safety margin that is being eroded at an accelerating pace.
For investors, current price levels may be misleading. They reflect the market’s ability to absorb the initial shock, not its capacity to sustain this equilibrium over time. As buffer resources are gradually depleted, systemic vulnerability will continue to rise, and the path toward $150 oil is becoming increasingly clear.
Inventories: The seemingly stable 'shock absorber' is failing
The most immediate reason the oil market has not exhibited a more violent reaction is that global inventories were higher than expected when this crisis began. These inventories have acted as a buffer, delaying—but not eliminating—the impact of the supply shock.
Data show that global commercial inventories have declined steadily for several consecutive weeks, with OECD member countries’ stocks now falling below their five-year average. According to independent tracking firms such as Vortexa and Kpler, floating storage volumes are also showing a steady downward trend. On charts, this process appears orderly and moderate—prices have risen, but without explosive spikes.
However, these inventories are not strategic reserves; they represent the minimum working stocks required to keep refineries, pipelines, and logistics operations running smoothly. Once inventories fall below this operational threshold, the entire system’s flexibility will be lost—refineries will have fewer crude options, logistical complexity will increase, and minor disruptions that were previously easily absorbed will begin to exert larger effects.
More critically, the consequences of inventory drawdowns are subject to lags. Weekly data may appear uneventful, but once the system exhausts its buffer capacity, the effects will materialize abruptly. Moreover, the more barrels drawn from inventories to cushion the shock, the more difficult and time-consuming the subsequent restocking process becomes.
Spare Capacity: Limited and Non-Interchangeable
Another reason the market has not experienced greater panic is the widespread perception that OPEC still holds spare production capacity.
Based on reported figures, this assessment appears valid. Saudi Arabia and a few other oil-producing countries do indeed retain the ability to increase output. However, in practice, spare capacity cannot fully substitute for lost supply from the Persian Gulf.
There are three reasons for this: First, not all crude oil is interchangeable—different grades of crude correspond to different refinery configurations. Second, bringing spare capacity online is not instantaneous; even if capacity exists, deploying it requires time and coordination. Third, and most critically, spare capacity itself is limited. Using it to offset a major supply shortfall would directly erode the system’s buffer against subsequent shocks. Once this cushion is exhausted, the market’s sensitivity to any additional disruption would rise significantly.
Thus, while spare capacity has served to stabilize prices in the short term, it has not resolved the underlying supply-demand imbalance.
Demand-side cooling: Marginal effect rather than structural shift
Changes on the demand side have also somewhat tempered the rise in oil prices.
High prices naturally lead to some degree of demand destruction: consumers drive less, airlines hedge risks or cut routes, and industrial users seek efficiency gains. In emerging markets, fuel consumption is particularly sensitive to price increases. Meanwhile, uneven global economic performance has also softened demand to some extent, partially offsetting the impact of supply disruptions.
However, this does not represent a structural decline in demand, but rather a temporary, marginal easing. Should economic activity rebound or consumers gradually adjust to a high-price environment, demand could quickly recover. At that point, the various buffers currently supporting market stability would face significantly greater strain.
Two paths: Normalization or price reassessment
From the current situation, the market faces two distinctly different trajectories.
The first scenario is a de-escalation of tensions. If the Strait of Hormuz reopens or oil flows partially resume, markets could begin rebuilding inventories and restoring supply-demand balance. Under this scenario, oil prices may stabilize at current levels or even decline, though a near-term return to pre-blockade price levels is highly unlikely.
The second scenario is a continuation of the current situation. If the blockade persists, inventories will continue to draw down, spare capacity will be further depleted, and the system’s margin for error will effectively vanish. At that point, the market would be forced to aggressively reprice the remaining supply. This is precisely when the prospect of oil prices reaching $150 becomes more credible—not necessarily due to a new shock, but because all buffers have been exhausted.
The fact that a three-month blockade has not driven oil prices to $150 indicates that markets possess greater short-term flexibility than many anticipated. However, flexibility does not equate to sustainability. The current equilibrium relies on resources that are being rapidly depleted and cannot be quickly replenished. Against this backdrop, the absence of a sharp price spike should not be interpreted as a sign that risks have been resolved, but rather as a warning that the adjustment process is still unfolding.
Editor/melody