Stocks of oil in US Strategic Petroleum Reserve falls to lowest since 1983

Stocks of crude ⁠oil ⁠in the U.S. Strategic ⁠Petroleum Reserve fell to 340.3 million barrels, the lowest level since ​1983, according to data from the Department of Energy on Monday, signaling tight supplies just ‌as the U.S. and Iran ‌agree on a deal to end the war and open the Strait of ⁠Hormuz. 

Inventories in ⁠the government’s emergency stash fell by 8.9 million barrels, the third ​steepest draw on record. The drawdowns are a part of a U.S. agreement to loan 172 million barrels from the facility to help push down fuel prices, which surged in recent ​months to multi-year highs.

U.S. crude stocks have fallen sharply in recent weeks due ⁠to ⁠high refining and export demand ⁠for ​American oil to fill supply gaps caused by the Iran war. Overall U.S. inventories, ​including commercial and SPR stocks, ⁠have fallen by 79 million to 77.6 million barrels, the lowest since 2023, after the war began at the end of February.

 Inventories at Cushing, the main storage hub for oil in Oklahoma and the pricing point for U.S. West Texas Intermediate crude ⁠futures, have eased to 21.6 million barrels, near operational lows, raising concerns of ⁠supply tightness.

Stocks in the SPR also dropped below the levels seen during the administration of former President Joe Biden, when it touched a low of 346.8 million barrels. 

Republican lawmakers at the time raised concerns that the sale of 180 million barrels of oil — the largest ever from the Strategic Petroleum Reserve following Russia’s invasion of Ukraine — was being used as a “political tool” and had damaged the system’s delicate salt caverns. The Biden administration denied ⁠those claims. 

Under the latest SPR loans, companies borrowing the oil are required to return the original volumes, with a premium in the form of extra oil. The department says that system will help stabilize markets at no ​cost to U.S. taxpayers.

Citi on Monday cut its ⁠average ⁠Brent crude forecasts to $75 ⁠and $70 per barrel for the third and fourth quarters ​of 2026, respectively, citing expectations that the Strait of Hormuz trade flows will resume ‌and normalize after the U.S. ‌and Iran approved a memorandum of understanding to end the war in ⁠the Gulf.

The ⁠bank also lowered its 2027 Brent forecast to $65 per barrel ​from $80 previously, shifting its outlook toward what had been its bear-case scenario, it said in a note.

Citi said its new base case, assigned a 60% probability, assumes ​the MoU is signed and negotiations ultimately secure sustained flows through the ⁠Strait ⁠of Hormuz at largely ⁠normalized rates ​by mid-to-late July. U.S. President Donald Trump said on Monday that the memorandum ​had been signed ⁠by the United States and Iran.

“In our view, the market is pricing the MoU itself, but not an agreement that secures SoH flows over the medium term; otherwise, crude oil prices would likely be ~$10–15/bbl lower than they ⁠are today,” said analysts at the bank. 

The brokerage added that limited U.S. ⁠appetite for renewed conflict and Iran’s willingness to engage support a strategy of selling summer oil rallies.

In the same note, Citi raised its 0–3 month gold price forecast to $4,500 per ounce from $4,000, and its silver price forecast to $70 per ounce from $60, saying broader risk sentiment is likely to improve.