US Crude Oil Inventories Drop 7.2 Million Barrels as Hormuz Tensions Drive Prices Higher
Key Takeaways
- •U.S. commercial crude inventories dropped by 7.2 million barrels to 404.5 million barrels in the week ending July 24, placing stockpiles roughly 7% below the five-year average for this time of year.
- •Brent crude surged 7.06% to $90.03 per barrel and WTI climbed 6.95% to $84.77 after the United States and Saudi Arabia conducted joint airstrikes against Iran-aligned militias inside Iraq.
- •Total U.S. oil demand, proxied by products supplied over the trailing four weeks, averaged 20.3 million barrels per day, representing a 2.3% year-over-year decline.
- •Middle distillate inventories grew by 1.1 million barrels but remained 9% below the five-year average, reflecting tight diesel and heating fuel supplies heading into the second half of the year.
- •The combination of falling crude inventories alongside weakening aggregate demand highlights that supply-side factors and geopolitical risk premia were the primary drivers of the day's oil price movement.
U.S. commercial crude oil inventories fell by 7.2 million barrels during the week ending July 24, bringing total stockpiles to 404.5 million barrels, according to data released Wednesday by the U.S. Energy Information Administration (EIA). The current inventory level sits approximately 7% below the five-year average for this time of year, a deficit that underscores the tightening balance in U.S. crude supplies even as overall product demand has softened.
The EIA figures followed data published a day earlier by the American Petroleum Institute (API), which reported a crude inventory draw of 3.296 million barrels for the same period.
Crude futures surged in early morning trading after the United States and Saudi Arabia conducted joint airstrikes against Iran-aligned militias inside Iraq. The military action came in response to drone strikes that had targeted Saudi oil infrastructure. The escalation adds to broader market anxiety over the Strait of Hormuz, through which roughly a fifth of global oil consumption transits daily, making any threat to the waterway a major price-risk factor for energy markets. As of 9:18 a.m. in New York, Brent crude was trading at $90.03 per barrel, gaining $5.94, or 7.06%, on the day—though still down roughly $3 per barrel compared to the same point the previous week. West Texas Intermediate (WTI) climbed by $5.51 per barrel, or 6.95%, to trade at $84.77 on Wednesday morning.
On the products side, the EIA reported that total motor gasoline inventories recorded a slight increase, following a build of 800,000 barrels in the prior week. Average daily gasoline production rose to 9.9 million barrels. Middle distillate inventories grew by 1.1 million barrels, with distillate production averaging 5.4 million barrels per day. Distillate stockpiles remain 9% below the five-year average, a level market participants monitor closely as it reflects supplies of diesel and heating fuel heading into the second half of the year.
Total products supplied, a widely used proxy for overall U.S. oil demand, averaged 20.3 million barrels per day over the trailing four-week period, representing a 2.3% decline compared with the same timeframe a year earlier. Gasoline demand over the last four weeks averaged 8.9 million barrels per day. The four-week average for distillate supply came in at 3.7 million barrels per day, up 4.7% year over year. The divergence—falling crude stockpiles alongside softening aggregate demand—highlights the role of supply-side factors, including the drawdown in inventories and geopolitical risk premia, in driving the day's price action.
By Julianne Geiger for Oilprice.com