The disruption has contributed to an estimated global oil supply deficit of 8-10 million b/d, or roughly 9% of worldwide demand, according to Andrew O’Conor, senior vice-president of energy and natural resources ratings.
To offset lost production, both commercial and strategic inventories have been drawn down. Morningstar DBRS cited estimates showing global crude inventories have fallen 3-5% since the conflict began, while refined-product inventories are down 8-10%, reducing the market’s buffer against further disruptions.
Although Saudi Arabia and the UAE can bypass Hormuz for some crude exports through pipeline systems, no comparable alternative exists for LNG exports from the Gulf.
North American gas
North American gas markets remain relatively well supplied, with US storage about 7% above the 5-year average and Canadian storage about 4% above average. Strong production from the Permian basin, Montney, and Duvernay plays continues to support supply and weigh on regional prices.
Meanwhile, European and Asian LNG benchmarks have risen about 50% since the conflict began. However, US and Canadian LNG export plants are operating near capacity, limiting their ability to immediately capture higher international prices.
Morningstar DBRS said the conflict has reinforced concerns about supply concentration and maritime chokepoints, prompting buyers to place greater value on supply reliability and geopolitical stability.
Canada’s LNG sector offers shorter shipping routes to Asia from British Columbia and avoids both the Strait of Hormuz and Panama Canal. The US retains advantages through its large gas resource base, extensive pipeline network, and expanding liquefaction capacity. Together, those factors could further solidify North America’s role as a preferred LNG supplier in an increasingly security-focused market, Morningstar DBRS said.
