America’s crude oil inventories are falling at an alarming rate, driven by ongoing disruption to oil flows through the Strait of Hormuz amid the war involving Iran.
The Energy Information Administration reports that U.S. petroleum inventories have plunged to their lowest levels since 2004, raising urgent questions about supply security.
Commercial crude inventories fell by 7.9 million barrels for the week ending May 15, far exceeding what analysts had projected for that period.
At the same time, the Strategic Petroleum Reserve dropped by another 9.9 million barrels, marking the eighth consecutive week of declines from emergency stockpiles.
Sustained SPR releases have helped cushion the immediate blow to markets, but analysts warn the drawdowns are eroding America’s emergency preparedness buffer significantly.
Despite the Strait of Hormuz remaining effectively closed for roughly four months, crude futures have stayed below $100 a barrel, helped by ongoing inventory releases.
ExxonMobil (XOM) senior vice president Neil Chapman warned that global inventories are approaching “really, really low levels” and that prices could surge dramatically once stockpiles bottom out.
“You can debate whether that’s going to hit in two weeks or three weeks,” Chapman said. “Once you get to that point, then you’ll see price shoot up.”
Chapman projected that once stockpiles hit historic lows, physical Brent crude could climb to between $150 and $160 a barrel, a level that would send shockwaves through the global economy.
The U.S. is exporting more oil, but increased production is not the reason behind those export volumes, according to one energy expert closely tracking the situation.
“We’re just kind of pulling that out of our inventory, and we’re shipping it overseas,” said Abhi Rajendran with the Center for Energy Studies at Rice University’s Baker Institute.
The timing of the inventory crisis could not be worse, with peak summer fuel demand approaching just as global stockpiles race toward critically low thresholds.
The head of the IEA’s oil industry and markets division warned that if stock draws continue at their current pace, inventories could hit dangerously low levels precisely during peak seasonal demand.
The convergence of geopolitical disruption, depleted strategic reserves, and surging summer demand has created what analysts describe as an unusually fragile moment for global energy markets.
