Oil Prices Extend Decline After The Largest Crude Inventory Drawdown In History, Cushing 'Tank Bottoms' Loom

Oil futures are down bigly this morning following comments from President Trump that the war in Iran would be ended "very quickly," but investors remained uncertain about the potential for de-escalation.

"We're going to end that war very quickly. They want to make a deal so badly, they're tired of - this should have happened for 47 years," Trump told a group of Congress members at the White House's annual congressional picnic on Tuesday.

"Somebody should have done something about it. And it's going to happen, and it's going to happen fast. And you're going to see oil prices plummet," the president added.

Oil's declines were also reportedly driven by this optimism about a final deal draft peace agreement:

On Tuesday, two Chinese tankers carrying crude oil traversed the Strait of Hormuz.

Another, a South Korean vessel, was passing through it, according to a Reuters report. Jim Reid, of Deutsche Bank, noted that this marks "one of the busiest days since the closure."

However, Iran's Revolutionary Guards also warned on Wednesday that any renewed strikes on Iran could expand the war beyond the region.

The IRGC also said it had not used all its capacities against the U.S. and Israel, while warning that their "devastating blows will crush" the adversaries, the IRGC said in a statement on its Sepah News website.

For now, all eyes are on the official inventory and supply data (and SPR) after yuuuge draws reported by API overnight...

API

• Crude -9.1mm (-3.4mm exp)

• Cushing -1.4mm

• Gasoline -5.8mm

• Distillates -1.0mm

DOE

• Crude -7.863mm (-6.0mm exp)

• Cushing -1.604mm

• Gasoline -1.548mm

• Distillates +372k

Crude stocks tumbled last week (biggest draw since Feb 13th) for the fourth week in a row. Gsoline inventories saw their 14th weekly drawdown in a row whil distillates saw another small build...

Source: Bloomberg

Strategic Petroleum Reserve drawdowns continue to accelerate with 9.92mm barrels/day - a record - drained last week. That means over 10% of the SPR has been drained in the last few weeks...

Source: Bloomberg

Total US crude stocks including the SPR are at the lowest level since June 2025 with this week seeing the largest SPR + Commercial stock drawdown in history...

Gasoline stockpiles continued their steady decline last week, falling another 1.5 million barrels. Stocks are still at the lowest seasonal levels since 2014.

Cushing stocks are rapidly approaching 'tank bottoms' once again...

US Crude production dipped very modestly last week...

Source: Bloomberg

WTI (July 2026) suddenly plunged below $100 just ahead of the official data (on peace deal optimism) and extended the losses after the big draw...

Finally, though the closure of the Strait has already pushed oil prices up by more than half, analytics firm Woods Mackenzie said if the war is extended until the end of the year, oil prices could rise as high as US$200 per barrel, though a quick settlement could lower Brent prices to US$80 by year end.

"The Strait of Hormuz is the most critical chokepoint in global energy markets, and a prolonged closure would become far more than an energy crisis," said Peter Martin, head of economics at Wood Mackenzie.

"The longer disruption persists, the greater the impact on energy prices, industrial activity, trade flows and global economic growth."

The market is awaiting the start of the high-demand U.S. summer driving season, which begins with this weekend's Memorial Day holiday.

It appears that American drivers will face the highest gas prices ever for Memorial Day...

...not great for Midterms/Approval ratings.