The data released by the US Energy Information Administration EIA on Monday (June 22nd) showed that US crude oil inventories have further hit a new low since 1983. Meanwhile, the crude oil storage data in Cushing, Oklahoma, has also approached the operational warning line. As part of the US-Iran understanding memorandum, the US Department of the Treasury issued a general license on the same day, authorizing the production, delivery, and sale of Iranian oil for a period of 60 days, which is expected to ease the tension in the market supply and demand.

China stockpiles continue to decline

The conflict between the United States, Israel, and Iran has triggered the strongest oil supply shock in history, with about 20% of the world's crude oil and liquefied natural gas needing to be transported through the Strait of Hormuz. However, factors such as joint releases of oil reserves by various countries and a spontaneous cooling of demand have suppressed the oil price surge for much of the conflict.

EIA said that the US strategic crude oil reserves have fallen to 331.2 million barrels, the lowest level since June 1983, a decrease of 90.5 million barrels compared to the previous week, the third highest record in history, and the continuous release of reserve crude oil is part of the US plan to inject 172 million barrels of crude oil into the reserve facility.

Meanwhile, the inventory at Cushing, the delivery center for US crude oil, is running low, approaching its operational limits. Typically, Cushing's storage capacity is about 40 million barrels and can hold up to 75 million barrels. As of the week ending June 12, 2026, Cushing's inventory decreased by about 1.6 million barrels, falling to 20.03 million barrels, the lowest level since 2014, and is infinitely close to the operational warning line of 20 million barrels, which is considered the operational limit.

With the Cushing storage position running low, the market has shown a clear reaction. To maintain the lowest physical inventory levels, pipeline takeaway capacity from the Permian Basin to Cushing, and away from the U.S. Gulf Coast, has increased significantly. The West Texas Intermediate (WTI) crude oil price differential between Cushing and the Gulf Coast has narrowed significantly. Crude oil inventories in the U.S. Third Strategic Petroleum Reserve (PADD 3) have also continued to decline since early May.

Wood Mackenzie's North American crude oil market director, Dylan White, said: "The global crude oil supply disruptions caused by the situation in the Middle East are the main reasons for the rapid decline in Cushing's inventory. Although US and Canadian China crude oil supplies have not been affected, the global supply gap has led to a significant increase in US crude oil exports and refining rates. Even though the US Strategic Petroleum Reserve continues to inject crude oil into the Gulf Coast markets, the shift in the supply-demand dynamics has still led to a sharp decline in US commercial inventories."

Commercial crude oil stocks in the United States are an important barometer reflecting the fundamental supply and demand. As the physical delivery place of the U.S. crude oil benchmark contract, the overall change in the U.S. crude oil stocks has also become a key factor affecting the international oil price and interpreting the global oil market pattern.

White concluded that: "In the coming months, global inventories will be the key indicator for oil prices. The continuous decline of various inventories, including strategic oil reserves, commercial inventories, and floating oil reserves in the sea, has alleviated the impact of supply disruptions in the Middle East to some extent. However, the inventory buffer is not infinite. If the supply disruption continues, the physical oil market will become significantly tight and oil prices will rise accordingly as the inventory continues to be consumed."

A US-Iranian ceasefire could improve the supply and demand environment

In a move that has drawn attention for its potential to impact global oil markets, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) announced on Monday that it is exempting transactions related to the production, delivery, and sale of Iranian crude oil, petrochemicals, and petroleum products that were previously prohibited by multiple U.S. executive orders and regulations. This exemption is valid until August 21, 2026. The announcement also permits the import of Iranian crude oil, petrochemicals, and petroleum products into the United States.

Although the ceasefire between the United States and Iran is still fragile and there are many differences to be resolved during the negotiation period. Even so, the oil market has reacted positively to this diplomatic progress, and investors' expectations for a short-term improvement in the transportation of crude oil through the Strait of Hormuz continue to heat up. Jane Street, global energy strategy analyst at Piper Sandler, said in a research note on Monday: "Crude oil flows will resume, but the smoothness will not be as good as before the war, and some crude oil will be transported via new routes."

At present, the market can clearly count two parts of floating crude oil: about 90 million barrels of non-Iranian crude oil floating and about 68 million barrels of Iranian crude oil waiting to be released in the Persian Gulf. Veson Nautical, a shipping data institution, counted on Monday that there are still 189 oil tankers stranded in the Persian Gulf, many of which are fully loaded with crude oil. After Iran blocked the strategic waterway in February, investors have always closely tracked the movement of oil tankers. However, it is extremely difficult to count the number of ships accurately: a large number of ships choose to "hide" and turn off the automatic identification system and radar signals of the ship to safely cross the strait.

The market widely believes that the shipping industry will not fully recover to normal for a period of time, and shipbuilders need to deal with multiple logistics and security issues, including the transfer of tankers, the re-planning of port calls, and the handling of shipping insurance.

Matt Smith, head of crude oil analysis at Kpler, an energy analytics firm, said it would take about three to four months for tankers to return to normal operations; and it would take even longer to make up for the loss of crude oil stocks during the conflict. In addition to the tankers stranded in the Persian Gulf, there are multiple supply constraints: during the period of canal disruptions, a large amount of crude oil was extracted in the Middle East and refining plants were almost shut down; some oil and gas facilities were also damaged in the fighting, and it takes time to restart and resume production of equipment.

The good news is that there have been no armed attacks on merchant shipping in the Persian Gulf and surrounding waters since mid-June.

Commerzbank has lowered its oil price forecast, cutting its year-end target price for Brent crude from $85 per barrel to $80 per barrel. The bank also believes oil prices will remain above pre-conflict levels for most of the coming year. Last week, Citigroup outlined its base scenario: as strait shipping normalises, the oil market will shift into oversupply, driving oil prices lower over the next 6 to 12 months. It expects Brent crude to drop back to the $60–$65 per barrel range in the first quarter of 2027.

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