RE: EXTREMELY OVERSOLD18 Jun 2026 16:17
We're approaching unheard of inventory levels," Exxon senior VP Neil Chapman also warned on low inventory levels at the time. "I mean really, really low levels," he said. "You can debate whether that's going to hit, those really low levels, in two weeks or three weeks. Once you get to that point, then you'll see price shoot up."
U.S. crude oil inventories have been on an extended decline, with the latest weekly report from the American Petroleum Institute showing the last nine weeks have seen the total reduced by 52 million barrels. Reserves at Cushing are also significantly down, to about 21 million barrels, according to a recent Wall Street Journal report that noted how "At roughly 20 million barrels, tank operators begin running into a variety of complications."
Such complications first surfaced about the strategic petroleum reserve system when the Biden administration released some 180 million barrels to rein in oil prices in 2022 after the West bombarded Russia with sanctions for its invasion of Ukraine. The complications arise from the need to keep a certain level of oil in the storage caverns so they can remain operational. The U.S. is not the only country that has been drawing on reserves to keep demand covered, which means demand to refill those reserves is looming over a market that has yet to return to normal operation and that still features rather healthy demand overall.
Meanwhile, no one besides oil traders seems enthusiastic about the reopening of the Strait of Hormuz. Insurers, as noted by Vortexa's analyst above, are taking a naturally cautious stance, waiting to see what happens on Friday and afterward before they return to business as usual. Shippers are not eager to get sailing, either. "We're not seeing any big shipowners changing their stance at this point. They're staying put for now," the global head of shipping research at Oil Brokerage Ltd. told Bloomberg. "As of now, no one has a clear understanding of the terms and text of this agreement," said Anoop Singh.
It appears the oil market is once again in a dual reality. One side of that duality is the futures market, ruled by media reports that fuel optimism about the end of hostilities in the Persian Gulf and the normalization of energy trade, overlooking the numerous challenges on the way to that normalization. The other side is the physical market, which has seen actual oil prices soar much higher than the benchmarks on the futures market, and which has experienced significant inventory drawdowns that oil-importing nations would be eager to replenish at first opportunity—just in case.
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