Oil Prices Extend Gains After Another Big Crude Draw, Cushing 'Tank Bottoms' Loom

Oil prices are higher this morning on renewed fighting between the US and Iran (and Trump rhetoric), while API reported a major crude inventory draw (for an eighth week in a row).

Additionally, in its monthly Short-Term Energy Outlook released on Tuesday, the Energy Information Administration (EIA) reported the closure of the Strait is depleting global inventories, keeping prices high.

"Global oil markets remain highly volatile as very limited shipping traffic through the Strait of Hormuz has caused oil producers in the Middle East to reduce crude oil production by more than 11 million barrels per day (b/d) in May compared with pre-conflict levels. This drop in production has resulted in large global inventory draws to meet demand. Under our assumptions, we expect global oil inventories will fall by an average of 6.3 million b/d in 2Q26 and by 7.6 million b/d in 3Q26," the agency said.

So this morning, all eyes are on the official data to see just how fast those inventories are depleting...

API

• Crude -9.1MM

• Cushing -1.1MM

• Gasoline -1.2MM

• Distillates +1.3MM

DOE

• Crude -7.23mm

• Cushing -801k

• Gasoline +186k

• Distillates -200k

Following API's reported a huge crude draw, the official data showed a seventh straight week of crude inventory declines. Gasoline stocks saw a build for the second week in a row...

Source: Bloomberg

Cushing 'tank bottoms' are looming...

Source: Bloomberg

US gasoline stocks are barely off their lowest levels since 2014 for this time of year...

Source: Bloomberg

The Strategic Petroleum Reserve saw another huge drawdown this week for a total of 66.2 million barrels since the Iran 'mini-war' started (16% of the pre-war total)...

Source: Bloomberg

Rig counts continue to rise with US crude production just shy of record highs...

Source: Bloomberg

US crude and product exports dipped last week but remain notably elevated from pre-war levels...

Source: Bloomberg

WTI was hovering just below $90 ahead of the official data

Despite the higher tensions, crude futures are down by more than a quarter since their peak at the end of April, aided by a combination of a plunge in Chinese imports to multiyear lows, record American oil exports and large releases of emergency reserves.

The retreat is a sign that oil markets are, for now at least, coping with the disruption and physical markets look well supplied.

“At the moment the market is trying to find some equilibrium,” Wael Sawan, Chief Executive Officer of Shell Plc, said on the sidelines of the Wall Street Journal CEO Council in London.

“It’s more driven by short-term headlines. And so if I look at the reality, we’re of course drawing down on those inventories fast.”

"While diplomatic efforts remain ongoing, the latest military exchanges have reintroduced a geopolitical risk premium into oil markets," Reuters quoted Priyanka Sachdeva, senior market analyst at Phillip Nova, as saying.