US crude oil inventories are rapidly declining, with a significant drop of 52 million barrels over the last nine weeks. The American Petroleum Institute (API) reported an 8.33 million barrel decrease in the week ending June 12, exceeding analyst expectations of a 4.5 million barrel draw. Despite this, total US crude inventories are only down 1.4 million barrels year-to-date according to API data. Overall US crude stocks, including commercial and Strategic Petroleum Reserve (SPR) stocks, have fallen by 79 million to 77.6 million barrels, reaching the lowest level since 2023 following the onset of the Iran war.
Inventories at Cushing, Oklahoma, a critical hub for West Texas Intermediate (WTI) crude, have fallen to 21.6 million barrels, dangerously close to operational stress levels of 20 million barrels where crude becomes largely unusable sludge. This is significantly below its normal storage capacity of around 40 million barrels and a maximum capacity of 75 million barrels. Each time Cushing has approached these minimums, fuel prices have surged to historic highs, as seen in 2008, 2022, and 2023. This rapid depletion is attributed to the US becoming a major oil supplier to regions typically served by the Middle East, leading to record-high demand for US oil since the Iran war began.
The Strategic Petroleum Reserve (SPR) has also seen a substantial drawdown. In the week ending June 12, another 8.9 million barrels were released from the SPR, bringing its total to 340.3 million barrels—the lowest level since 1983 and below the 2023 low during the Biden administration. The current SPR level is 385 million barrels shy of its maximum capacity. These drawdowns are part of a US agreement to loan 172 million barrels to alleviate pricing pressure, with the borrowed oil expected to be returned with a premium.
The rapid depletion of oil stockpiles is having a significant impact on prices. Brent crude was trading at $79.18 per barrel, a $12 drop from the previous week due to a preliminary US-Iran deal potentially reopening the Strait of Hormuz. WTI also dropped by $4.50, trading at $76.25, also reflecting a $12 decrease from the prior week. However, if the situation does not resolve and the Strait does not fully reopen, oil prices could easily rise above $90, potentially reaching $140 to $160 per barrel, with gasoline topping $5 per gallon in the coming months, according to David Oxley, chief climate and commodities economist at Capital Economics. Goldman Sachs analysts noted that visible inventories globally shrank by a record 8.7 million barrels a day so far in May, nearly double the average pace since the conflict began, with global stockpiles already being drawn down at an average pace of 4.6 million barrels a day since March.
Other inventories are also falling, with US diesel stocks at their lowest since 2003, and gas inventories down about 5% from a year ago. Commercial crude storage facilities outside of Cushing experienced a 7.2 million barrel draw last week. Globally, oil stockpiles in the wealthiest nations are falling by 6.3 million barrels per day, standing at 2.6 billion barrels, only 100 million barrels above operational stress levels. US production increased to 13.799 million barrels per day for the week ending June 5, up from 13.707 million barrels per day the week prior, and 371,000 barrels per day higher than a year ago. Gasoline inventories rose by 2.479 million barrels in the week ending June 12, while distillate inventories fell by 461,000 barrels.
