Updated

Updated · POLITICO · Jun 4

U.S. Oil Stocks Drop 52 Million Barrels as Hormuz Closure Threatens $4.26 Gasoline

Updated

Updated · POLITICO · Jun 4

U.S. Oil Stocks Drop 52 Million Barrels as Hormuz Closure Threatens $4.26 Gasoline

Q: Can releasing strategic reserves fix oil prices if the world's most critical shipping lane remains closed?

No. Releasing strategic reserves can cushion the shock for a while, but it cannot sustainably stabilize oil prices if the Strait of Hormuz stays closed. The core problem is physical supply. Hormuz normally carries roughly a quarter of global seaborne oil trade, and the current disruption has shut in around 10.5 million to 10.8 million barrels a day of Middle East production. That is far larger than what emergency stock releases can replace for long. The IEA has called it the largest supply disruption in oil-market history. Reserve releases do help at the margin. The coordinated drawdown by IEA members, including a 172 million-barrel U.S. SPR release, can slow inventory declines, calm panic buying, and buy time for diplomacy and rerouting. But these barrels are finite, while the supply loss is ongoing. If the chokepoint remains blocked, inventories keep falling and the market stays in deficit. Alternative export routes are too limited to solve the problem. Saudi and UAE pipelines can bypass some Gulf flows, but their combined capacity is well below the volumes that normally move through Hormuz, and even those routes face security risks. That is why prices are still rising despite reserve action. U.S. crude inventories just fell by 8 million barrels, and Brent and WTI both jumped more than 2% after the EIA data. Strategic reserves can reduce the speed of the price spike, but reopening the shipping lane—or restoring equivalent export capacity—is what would truly ease prices.

3 articles · Updated · POLITICO · Jun 4

U.S. commercial petroleum inventories have fallen 52 million barrels since the war began, leaving oil executives and analysts warning that gasoline prices could jump again later this month despite recent easing from near $4.50 a gallon.
An 8 million-barrel drop in U.S. crude stocks last week marked the eighth straight weekly decline, while gasoline inventories sit 5% below the five-year average and diesel and jet fuel are 3% under it.
Industry figures say the three-month effective closure of the Strait of Hormuz has forced countries to drain storage tanks to replace lost Middle East supply, with some warning Brent could reach $150-$160 a barrel as inventories hit operational minimums.
The Trump administration denies receiving private warnings and argues record U.S. output, Venezuelan supply, Jones Act waivers and SPR releases are cushioning motorists, even as Trump said the blockade could last until Labor Day.
Global inventories are falling by about 5.8 million barrels a day despite a 400 million-barrel IEA release effort, raising the risk that a disruption markets have absorbed so far turns into broader fuel and industrial shortages by late summer.