U.S. Crude Inventories Fall to Lowest Level in Nearly a Year

U.S. crude inventories fell 17.8 million barrels in the week ending May 15, according to data released by the Energy Information Administration. The drop marks the latest in a series of weekly declines that have brought total stocks, including the Strategic Petroleum Reserve, to their lowest level in almost a year.

The reductions coincide with the closure of the Strait of Hormuz after the start of conflict on February 28. The route previously carried about one-fifth of global oil supply, and its closure has lifted prices to multi-year highs.

Commercial crude inventories stand at 445 million barrels, about 2 percent below the five-year average for this period. Distillate stocks, which include diesel and heating oil, have fallen further below seasonal norms. Energy analyst Tom Kloza said the figures are likely to spark concern and that observers appear to be ignoring warning signs for gasoline and diesel prices.

Bob Yawger, director of energy futures at Mizuho, projected that inventories could fall below 400 million barrels within nine weeks if the current pace continues.

The administration announced in March that it would release about 172 million barrels from the Strategic Petroleum Reserve over 120 days. Officials said the releases aim to ease pressure on domestic fuel prices. At the same time, U.S. exports have reached record levels as buyers in Asia and Europe seek alternative supplies.

Shih noted that the oil is moving to markets willing to pay higher prices, which raises costs inside the United States. Bob McNally of Rapidan Energy Group said inventory drawdowns have so far limited further price increases, but that effect will diminish once stocks reach operational minimums this summer.

Philip Verleger stated that halting exports could lead to a trade dispute and possible global recession.