Explained: the global scramble to refill oil reserves and boost gas supplies

As concerns over supply risks grow, countries are investing in alternative trade routes and infrastructure while diversifying sources of crude oil, natural gas, and LNG. Moreover, traders have reported burning through all their buffer stock, creating worries of a supply shortage. In this context, the global oil and gas landscape is being reshaped in ways that could have lasting impressions on producers, consumers, and energy markets alike.

Is there an oil supply crunch?

Global strategic petroleum reserves have been drawn down significantly during the latest Middle East crisis, as governments turned to emergency inventories to stabilise markets and prevent sharper price spikes. The US Strategic Petroleum Reserve (SPR) fell to 316.5 million barrels, the lowest in 43 years, according to Department of Energy data. 

The International Energy Agency (IEA) member countries also coordinated the largest collective emergency oil stock release in the organisation’s history. As of March 2026, IEA members collectively held around 1.8 billion barrels of oil in strategic reserves. 

However, the agency has said that almost three-quarters of the planned 400-million-barrel emergency release announced in March has already been delivered to the market, leaving only a limited volume available before those additional supplies are exhausted.

Emerging economies continue to account for much of the world’s oil consumption growth as industrialisation, transport demand and rising incomes increase fuel use. 

Vandana Hari, Founder of Vanda Insights and columnist for Energy Connects, said, “The US-Iran interim peace deal has not formally collapsed. But it has been overtaken by the very disputes it was supposed to manage, thrusting the oil market back into supply uncertainty less than three weeks after it had begun pricing a return to normality.”

On the other hand, IEA Executive Director Dr Fatih Birol has warned that while advanced economies such as South Korea and Japan have experienced disruptions to Gulf energy deliveries, countries including Bangladesh, Pakistan and India remain considerably more vulnerable to prolonged supply interruptions because of their growing dependence on imported fuels and more limited strategic reserves. 

“The US-Iran interim peace deal has not formally collapsed. But it has been overtaken by the very disputes it was supposed to manage, thrusting the oil market back into supply uncertainty less than three weeks after it had begun pricing a return to normality.”

- Vandana Hari, Founder of Vanda Insights

Local news reported South Korean Prime Minister Han Seong-sook as saying, “We should take instability in international oil prices as a constant and take mid- and long-term steps. We should thoroughly check on the supply situations of crude oil and naphtha and actively seek to use detour routes and diversify supply chains.”

South Korea already convened an emergency meeting on Wednesday to assess its crude supply security in case further disruptions occur. These geopolitical tensions suggest that energy security concerns are becoming central to government policy. 

Is crude going into backwardation?

One of the clearest indicators of tightening supply has emerged in the futures market. Brent crude has moved into backwardation, a market structure in which prompt delivery contracts trade at a premium to contracts for future delivery.

This typically reflects expectations of tighter near-term supplies, with buyers willing to pay more to secure oil immediately rather than wait several months. According to Reuters, the first-month Brent contract traded $8.92 per barrel above the sixth-month contract this week, which is the largest premium since June.  

Such pricing often indicate concerns about immediate physical availability rather than longer-term shortages. European wholesale diesel futures also climbed 14% this week. Diesel remains essential for freight transport, manufacturing, and agriculture, meaning sustained price increase can affect multiple industries.

How are countries expanding supply capabilities? 

The latest supply shock has accelerated efforts by producing countries to diversify export routes and expand production capacity. The US has transformed itself into one of the leading producers and exporters of oil and natural gas, mainly through the growth of shale production. 

American LNG exports have become increasingly important in supplying Europe and Asia, while policymakers continue to view domestic production as a strategic geopolitical asset. Canada is also seeking to strengthen its position in global markets by expanding pipeline infrastructure and export capacity particularly to Asia. 

Meanwhile, Saudi Arabia has invested in its East-West Pipeline, which transports crude oil from the Eastern Province to the Red Sea port of Yanbu, thereby avoiding the Strait of Hormuz. Similarly, the UAE is doubling the export capacity of its Habshan-Fujairah pipeline to roughly six million barrels per day. 

Shipping practices are also evolving. During the recent conflict, some tankers travelled through the strait with their tracking transponders switched off to reduce security risks. Countries like China have expanded domestic crude storage, which has spent years building large strategic petroleum reserves.

Where does natural gas fit into the equation? 

Natural gas has emerged as both a lower-carbon alternative to coal and as a flexible source of power generation that complements renewable energy. As more countries expand wind and solar capacity, gas-fired power plants continue to provide the reliability needed when renewable output fluctuates.

Demand growth is expected to remain particularly in Southeast Asia, where the region continues to increase LNG imports. According to Shell’s latest LNG Outlook, global LNG demand could approach 700 million tonnes annually by 2050, driven by industrial growth, power generation, and energy security. 

Shell added that around 180 million tonnes per annum (mtpa) of new liquefaction capacity will come online by 2030, led by projects in North America and Qatar. The recent disruptions in the Middle East have also reinforced Europe’s need to diversify supply sources, forcing it to make tough decisions. 

Why is Europe still buying Russian gas?

Despite political commitments to reduce dependence on Russian energy, Europe continues to import significant volumes of Russian LNG. As Europe prepares for another winter with rising energy prices, it is hesitant to eliminate a key source of supplies before alternatives are available.

European companies also remain tied to agreements signed years ago, including contracts linked to Russia’s Yamal LNG project, in which France’s TotalEnergies holds interests. Exiting these agreements will be complex. The European Union has announced plans to phase out Russian fossil fuel imports by 2027. Until then, Russian LNG will continue to enter European markets.

What does the future hold for both producers and buyers? 

Major exporters are racing to expand production. Qatar continues to increase LNG capacity through its North Field expansion, while the US is adding new export terminals along its Gulf Coast. Canada is vying for entry into Asian markets, by proposing a one-million-barrel-a-day pipeline from Alberta to Japan, Korea, China, and India via its Vancouver port. 

The UAE is pursuing plans to raise its oil production capacity to 5 million barrels per day while investing heavily in both upstream production and LNG. New suppliers are also entering the market. Argentina’s Vaca Muerta shale formation is attracting substantial investment, adding another source of supply diversification for global buyers.