Key facts
- Oil prices are holding near $100 per barrel.
- U.S. gasoline stocks are at their lowest level since 2014.
- Cushing, Oklahoma, oil storage levels are nearing operational minimums.
- U.S. crude oil inventories decreased by 7,974,000 barrels for the week.
- U.S. crude oil inventories are 3% below the five-year average.
- OPEC crude output has fallen to its lowest level in decades.
- Kuwait anticipates a 10-12 week recovery for its oil production.
- Companies will return 40 million barrels to the U.S. Strategic Petroleum Reserve.
- U.S. oil rigs have increased for the seventh consecutive week.
- Weekly gasoline prices have fallen for the third consecutive week, reaching a 1-month low.
- U.S. natural gas futures declined due to lower LNG export flows.
Oil prices are holding near $100 per barrel, influenced by geopolitical tensions and substantial inventory drawdowns. U.S. gasoline stocks have reached their lowest level since 2014, and crude inventories continue to fall, with Cushing, Oklahoma, approaching its operational minimum storage capacity. Refiners are actively acquiring crude to compensate for lost supplies amid the Middle East war. The U.S. Energy Information Administration (EIA) reported a decrease of 7,974,000 barrels in U.S. crude oil inventories for the week, exceeding the expected draw of 4,007,000 barrels. Total U.S. crude stockpiles now stand at 433.7 million barrels, which is 3% below the five-year average. The American Petroleum Institute (API) also reported a significant draw of 6.8 million barrels in U.S. crude oil stockpiles for the same period. These dwindling inventories are raising concerns about market vulnerability as the summer driving season approaches.
OPEC crude output has fallen to its lowest level in decades, attributed to tightening U.S. naval blockades on Iran and disruptions in the Persian Gulf. In response to this production slump, OPEC+ plans to further relax its output targets. Kuwait Petroleum Company estimates a 10-12 week recovery period for its oil production following the reopening of the Strait of Hormuz, projecting 70% of normal output within six to eight weeks and the remaining 30% in an additional month. Russia, however, is exporting the most crude oil since its 2022 invasion of Ukraine, despite drone attacks on domestic refineries, indicating a shift towards crude sales due to reduced processing capacity.
Companies that borrowed crude oil from the U.S. Strategic Petroleum Reserve (SPR) are set to return an additional 40 million barrels as a premium after the conflict in Iran concludes. U.S. Energy Secretary Chris Wright stated that the department is trading barrels, receiving 1.25 barrels back for each barrel loaned out, and expressed no concern about current SPR stock levels. Meanwhile, U.S. oil rigs have increased for the seventh consecutive week, marking the longest streak since 2022, according to Baker Hughes. This expansion in drilling activity suggests a potential shift in the energy market. WTI Crude Oil futures eased from a midweek peak of $97 per barrel to near $90, influenced by stronger-than-expected U.S. jobs data that shifted investor focus to potential central bank rate hikes. Market volatility and speculator net long positions have also declined.
In other energy markets, U.S. natural gas futures declined as domestic gas flows to liquefied natural gas export terminals along the U.S. Gulf Coast dropped for a third consecutive day, primarily at Sabine Pass LNG in Louisiana and Corpus Christi LNG in Texas. Weekly gasoline prices have fallen for the third consecutive week, reaching their lowest point since late April as of June 1st, with regular gasoline prices decreasing by 17 cents and premium gasoline prices dropping by 14 cents.