US crude stockpiles fell as oil exports reduced domestic inventories, according to Bloomberg. The US Energy Information Administration reported a drop of 17.8 million barrels, taking stockpiles to their lowest level in nearly a year.
Demand for US-produced oil rose amid conflict in the Middle East. Overseas crude shipments have averaged 5.3 million barrels per day this month and, if maintained, would set a new record.
Exports Drive Inventory Draw
Recent data showed the US became a net exporter for the first time on record. Exports were reported to have helped limit a rise in crude prices.
Buyers sought alternative supplies after the Strait of Hormuz was closed. The US also released crude from its Strategic Petroleum Reserve to reduce the impact of the supply disruption.
The recent 17.8 million barrel drop in US crude inventories is a significant bullish signal for oil prices. With inventories now sitting around 415 million barrels, the lowest in over a year, the market’s supply cushion is shrinking rapidly. We see this as a clear indicator that the path of least resistance for West Texas Intermediate (WTI) prices, currently hovering near $95, is upward.
This massive draw is fueled by record-setting exports, which are on pace to exceed 5.3 million barrels per day for the month. The ongoing Middle East conflict and closure of the Strait of Hormuz has kept the price of Brent crude about $7 higher than WTI, making it highly profitable to ship American oil overseas. As long as this wide price difference persists, we should expect US stockpiles to continue to drain at an alarming rate.
Positioning And Key Levels
While US oil production is robust, it is already near its all-time high of around 13.3 million barrels per day. It is unlikely that producers can ramp up output quickly enough to offset both strong domestic demand and this intense international pull. This suggests the supply-demand balance will remain tight, leaving prices sensitive to any further disruptions.
We must also consider the Strategic Petroleum Reserve (SPR), which is now at a multi-decade low of roughly 345 million barrels following these recent releases. This is a situation similar to what we observed back in 2022, but the reserve is even lower now, meaning the government has limited ability to intervene further. This safety net is becoming threadbare, removing a key tool that has previously been used to calm markets.
Given this outlook, we should anticipate increased price volatility in the weeks ahead, with risks clearly skewed to the upside. Establishing long positions through buying July or August 2026 WTI call options or call spreads could capture potential price spikes. The sharp inventory decline suggests that the market is under-supplied, and any unexpected catalyst could send prices sharply higher.
Moving forward, the weekly Energy Information Administration (EIA) inventory report will be the most critical data point to watch. Another large draw would confirm the underlying tightness and likely push prices through key resistance levels. Traders should also monitor the Brent-WTI spread, as any further widening would only accelerate the depletion of domestic stockpiles.
