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America’s oil cupboard is looking dangerously bare. Commercial crude inventories fell to 409.7 million barrels for the week ending July 10, a decline of 1.7 million barrels from the prior week and a full 6% below the five-year average. The Strategic Petroleum Reserve sits at 349.2 million barrels, a level not seen since 1983.
The Iran conflict, which escalated into a full coalition operation involving the US and Israel beginning in late February, has ripped through global oil supply chains. Global supply losses now exceed 1 billion barrels. The near-closure of the Strait of Hormuz has been the single most devastating supply-side factor. That narrow waterway between Iran and the Arabian Peninsula normally handles roughly one-fifth of the world’s daily oil consumption, with approximately 15 million barrels per day typically transiting through it.
Total US crude and petroleum product inventories have dropped to 1.57 billion barrels, the lowest level since 2004. The International Energy Agency coordinated emergency releases of over 400 million barrels from strategic reserves across member nations. Most of those releases concluded by early July.
The IEA’s coordinated release of 400 million barrels was historically unprecedented in scale. Previous coordinated releases, including during the Libyan civil war in 2011 and after Hurricane Katrina, were measured in tens of millions of barrels.
With buffers depleted at both the commercial and strategic levels, any additional disruption would hit a market with almost no shock absorbers left. The end of IEA emergency releases in early July removes the artificial supply floor that had been partially containing prices.
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