U.S. Strategic Petroleum Reserve Nears Record Low as Pressure on Iran Backfires

As ceasefire talks between the United States and Iran remain deadlocked, another warning sign is growing louder in the global energy market. With shipping restrictions in the Strait of Hormuz now in place for a fourth month, U.S. inventories of crude oil and petroleum products have fallen to their lowest level in 22 years. Global oil prices have climbed back toward $100 a barrel, and the New York stock market has plunged. The situation shows that supply shortages caused by a prolonged war are becoming a reality. In the market, some analysts say the United States' rapid inventory drawdown is a more dangerous variable than the ceasefire talks themselves. Oil analysts are worried that prices could surge sharply again within weeks as inventories, which act as a buffer against a price spike, continue to shrink. Bob McNally, chairman of Rapidan Energy Group and a former White House adviser, warned that if the Strait of Hormuz is not reopened, global oil prices could reach $200 a barrel this summer.
■ U.S. 'oil warehouse' falls to lowest level in 22 years
According to the U.S. Energy Information Administration (EIA) on the 3rd, total U.S. inventories of crude oil and petroleum products stood at 1.57 billion barrels as of the 29th of last month. That was down 10.6 million barrels from a week earlier, the lowest level since May 2004.
Commercial crude inventories fell by 8 million barrels in a week to 433.7 million barrels. That was nearly double the market expectation of a 4 million-barrel decline.
The pace of decline in the strategic petroleum reserve (SPR) is also alarming. Current reserves stand at 357.12 million barrels, the lowest since January 2024. Since the outbreak of the Iran war in February, the Trump administration has supplied about 58 million barrels to the market. Roughly 14% of total reserves have been released since the war began.
Market participants are concerned that if the current pace of releases continues, the SPR could soon fall below the lowest level seen under the Biden administration. If that scenario materializes, U.S. SPR holdings would be at their lowest level since 1983.
The main reason for the inventory decline is a surge in exports. As disruptions to Middle Eastern crude supplies have intensified because of the Strait of Hormuz blockade, refiners in Asia and Europe have rushed to secure U.S. crude. As a result, U.S. crude exports hit a record high in May at an average of 5.6 million barrels per day. That surpassed the previous record of 5.2 million barrels per day set in April.
Concerns over energy supply are spreading across financial markets. Iran recently attacked Kuwait International Airport and U.S. military bases in the region in retaliation for U.S. military strikes. The United States responded by striking an Iranian oil tanker and military facilities, reigniting the exchange of force between the two sides.
Oil prices reacted immediately as ceasefire talks stalled. Brent Crude Oil settled at $97.81 per barrel, up 1.9% from the previous session, while WTI rose 2.4% to $96.02 per barrel. The market sees a high likelihood that prices will break back above the $100 mark.
The price gap between Brent Crude Oil and West Texas Intermediate crude oil, which had once widened to nearly $20 per barrel, also narrowed sharply. As demand for U.S. crude surged, the spread had narrowed to just $1.79 per barrel as of that day.
■ Oil nears $100, rattling stocks
The New York stock market was also hit hard. The Dow Jones Industrial Average fell by more than 620 points, while the S&P 500 Index and the Nasdaq Index ended nine straight sessions of gains. NVIDIA, a leading artificial intelligence stock, also dropped more than 3%.
Inflation concerns have resurfaced in the bond market. The yield on 10-year U.S. Treasuries briefly rose above 4.5% during the session, while the 30-year yield also moved above the 5% level. Investors are beginning to price in the possibility that the Fed could raise interest rates again this year.
Warnings from the energy industry are also mounting. Neil Chapman, senior vice president at ExxonMobil, recently said, "Global crude inventories could fall to extremely low levels within the next two to three weeks," and added, "At that point, we will see prices spike."
The International Energy Agency (IEA) estimates that the cumulative supply gap in the global market since the Strait of Hormuz restrictions began has exceeded 1 billion barrels.
U.S. President Donald Trump has claimed that a ceasefire MOU with Iran could be signed as early as this weekend. However, the market appears to be paying more attention to actual supply conditions than to the wording of the talks. Wall Street is worried that if the war drags on, Middle East risks could evolve from a diplomatic issue into an energy crisis.
km@fnnews.com Kim Kyung-min Reporter