Global Oil Markets Nearing Minimum Operating Levels Amid Iran War, Analyst Warns

Oil markets are nearing minimum operating levels in Asia, with Europe likely next and the U.S. potentially facing shortages by July, Jeff Currie, Carlyle's chief strategy officer of energy pathways, said Monday, underscoring the global energy shock due to the Iran war.

Headline global inventory figures can be misleading, Currie warned, as much of the oil stored worldwide cannot be used immediately.

A large portion of that oil is needed to keep pipelines and storage systems running safely, leaving only a smaller share available for the market. Asia is already close to these so-called "minimum operating levels," Currie told CNBC on the sidelines of the UBS Wealth Conference in Singapore.

Global oil markets have been under strain since the outbreak of the Iran war earlier this year, after disruptions to shipping through the Strait of Hormuz sharply curtailed energy exports from the Middle East.

"We've seen explosive prices on products. Jet fuel has come down, but diesel has now gone up above jet fuel. So, the problem here in Singapore continues. It just moved from jet to diesel," Currie said.

Europe could begin seeing similar strains within weeks, as the current relief from U.S. oil flows may prove temporary, and as the summer driving season starts. "I would say, Asia, you're there. Europe, give it about another month, and look for July being a problem in the U.S.," Currie said.

"All of the inventories that are drawing out of the United States out of the U.S. SPR [Strategic Petroleum Reserve] are being exported into Europe, so the Europeans think they have no problem because they're getting all of this oil being imported from the United States, but that can't continue on."

His comments come on the back of recent warnings by the International Energy Agency that the global oil market could face a critical supply squeeze during the peak summer consumption period, especially if Middle Eastern exports fail to recover and inventories continue falling.

"We may be entering the red zone in July or August if we don't see that there are some improvements in the situation," IEA chief Fatih Birol cautioned last week.

Carlyle's Currie dismissed proposals such as suspending the U.S. federal gasoline tax as insufficient to address the underlying supply crunch.

"That doesn't solve any of the problems. The only way you solve this problem is to increase the availability of molecules," he said, referring to physical oil supply. While releases from the U.S. SPR have provided some relief, Currie said market pricing suggests underlying shortages remain acute.

Ultimately, reopening the Strait of Hormuz remains the only lasting solution, though even that would take time to normalize markets, Currie said, arguing that shrinking global inventories are also strengthening Iran's leverage in ongoing negotiations.

U.S. President Donald Trump on Sunday asked his team to not agree a deal with Iran in a hurry to end the war and reopen the Strait of Hormuz.

"Every day that goes by, Iran's negotiating leverage compounds. Why? Because inventories of oil and inventories continue to drop," he said. "The minute you think you won, that's exactly when you know you probably lost, and their negotiating position at this point has never been stronger in the last 47 years."