By: Tom Pawlicki, Senior Specialist, Market Intelligence
There have been warnings in the last couple weeks about the approach of extremely low crude oil and oil product inventories from oil company executives and from energy agencies such as the IEA. The market has continued to ignore that based on the expectation that the war will end sooner than later.
On June 1, an executive from Exxon said at a conference that "We're approaching unheard of inventory levels ... really, really low levels." Separately, Exxon CEO Darren Woods has been warning that the market has been relying on inventories and other supply buffers to absorb the Iran/Hormuz disruption. Chevron’s CEO Mike Wirth said about a week ago that before long, inventories will draw down toward concerning levels. He said that June and July will be critical months, and that some physical shortages are being seen in Asian markets.
An EVP from Abu Dhabi’s state oil company ADNOC said this week that August could mark a tipping point for much higher oil prices if demand rises and the Iran war supply crisis persists. Officials from the Paris-based IEA have said that "stocks are being depleted rapidly and could reach critical lows before peak summer demand."
In the EIA’s last Short-Term Energy Outlook in May, it showed OECD inventories averaging 2.565 bln bbls in 2026, and down from 3.027 bln bbls that was projected in its February STEO just before the war began.
Weekly data on distillate and gasoline inventories have shown significant drawdowns since the end of February. Distillate inventories were 3.3 mln bbls below their five-year average in the week ending February 27, but are now 12.9 mln bbls below it. Gasoline inventories were at a surplus to the five-year average of 10.1 mln bbls at the end of February, but are now at a deficit of 10.7 mln bbls. The chart below shows distillate inventories below the five-year range, and the picture for gasoline is similar.
Oil inventories haven’t been impacted as much, perhaps due to the release of oil from the Strategic Petroleum Reserve. Oil inventories have moved from a deficit to the five year average of 12.8 mln bbls to a deficit of 15.4 mln bbls in the last three months.
The US Energy Secretary Chris Wright today said that companies that borrowed oil from the SPR will return the oil with a premium of 0.25 bbls for each barrel that was borrowed. He said that will add 40 mln bbls to the reserve after the war is over. He said he is not concerned about the low levels of the SPR because the DOE is trading those barrels and they will be replaced after the war. Replacement will be made at a ratio of 1.25 for every barrel loaned now. That seems expensive, but refiners may make such a deal in order to avoid force majeure or other activities would may force them to default on contracts. There have only a few times the futures price curve suggested such a loan would be worthwhile and less than the indicated 25% interest rate. The spread between the front month and 12th month in WTI and divided by the current front month price would indicate such a low is worthwhile when the spread is greater than 25%. There have only bee a few times this year when that has been the case.
The only problem with the reasoning by the energy secretary is if the war goes on longer than expected, and that has been the biggest unknown since it began. He said that oil would be returned to the SPR next year, but if the war and the closure of Hormuz extend into next year, then oil won’t be repaid on time and low levels in the SPR could become problematic.
That would bring the market to the other solutions that Mike Wirth discussed, which were that price prices send a signal to produce more and consume less. Oil shortages are followed by gluts. The UAE is expanding its pipeline capacity to get oil out of the Gulf and into the Sea of Oman. Iraq said this week that it will triple its crude exports through pipelines to 770,000 bpd from 220,000 bpd, and deliver oil in the Mediterranean. In the US, Cheniere said on May 29 that it signed a $4.69 bln deal with Bechtel to expand LNG export capacity in the US Gulf. The investments aren’t enough to make up for all of the lost output through Hormuz, but they will continue to help in the long run.
It’s easy to see the case for significantly higher oil prices in coming months as shortages develop and emergency reserves are consumed. However, it is also possible that the war will end sooner than later and Hormuz to reopen. The market is likely to remain fragile in the near-term.
This material should be construed as market commentary and represents the opinions and viewpoints of the author, and does not reflect tailored advice associated with any specific account.
The views are current only through the date stated and are subject to change at any time based upon market or other conditions, and StoneX Group Inc. (“SGI”) disclaims any responsibility to update such views. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. Past performance does not guarantee future results.
The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided.
References to certain OTC products or swaps are made on behalf of StoneX Markets, LLC (SXM), a member of the National Futures Association (NFA) and provisionally registered with the U.S. Commodity Futures Trading Commission (CFTC) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ and who have been accepted as customers of SXM.
StoneX Financial Inc. (SFI) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI is registered with the U.S. Securities and Exchange Commission (SEC) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Advisor. StoneX Financial (Canada) Inc. (SFCI) is registered in Canada and is a member of CIRO and CIPF. References to certain securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to certain exchange-traded futures and options are made on behalf of the FCM Division of SFI. Wealth Management is offered through SA Stone Wealth Management Inc., member FINRA/SIPC, and SA Stone Investment Advisors Inc., an SEC-registered investment advisor, both wholly owned subsidiaries of SGI.
R.J. O’Brien & Associates, LLC (RJO) is registered with the CFTC as a Futures Commission Merchant and is a member of NFA.
StoneX Financial Ltd (SFL) is registered in England and Wales, company no. 5616586. SFL is authorized and regulated by the Financial Conduct Authority (FCA) (registration number FRN:446717) to provide services to professional and eligible customers including: arrangement, execution and, where required, clearing derivative transactions in exchange traded futures and options. SFL is also authorized to engage in the arrangement and execution of transactions in certain OTC products, certain securities trading, precious metals trading and payment services to eligible customers. SFL is authorized and regulated by the FCA under the Payment Services Regulations 2017 for the provision of payment services. SFL is a category 1 ring-dealing member of the London Metal Exchange. In addition SFL also engages in other physically delivered commodities business and other general business activities which are unregulated and not required to be authorized by the FCA.
This communication is issued in the European Economic Area by StoneX Financial Europe GmbH (SFEG). StoneX is the trade name used by STONEX GROUP INC. and all its associated entities and subsidiaries. StoneX Financial Europe GmbH (“SFEG”) is a securities trading firm registered in Germany under Company No. HRB 80844.
StoneX Financial Pte Ltd (Co. Reg. No 201130598R) (“SFP”) is regulated by the Monetary Authority of Singapore and is a Capital Markets Service Licence holder (for dealing in capital market products), an Exempt Financial Adviser (for advising on investment products and issuing or promulgating analyses/ reports on investment products) and a Major Payment Institution (for domestic and cross-border money transfer services).
SFP may distribute analysis/report produced by its respective foreign affiliates within the StoneX Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations Recipients should contact SFP at (65) 6309 1000 for any matters arising from, or in connection with, this webinar.
StoneX APAC Pte. Ltd. (“SAP”) (Co. Reg. No 200616676W) is regulated as a Dealer (PS20190001002) under the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 for purposes of anti-money laundering and countering the financing of terrorism.
StoneX Financial (HK) Limited (CE No.: BCQ152) (“SHK”) is regulated by the Hong Kong Securities and Futures Commission for Dealing in Securities and Dealing in Futures Contracts.
StoneX Financial Pty Ltd (ACN 141 774 727) holds an Australian Financial Service License (AFSL: 345646) for Dealing in Securities, Exchange-Traded Derivatives Contracts, OTC Derivatives Contracts and Foreign Exchange Contracts, and is regulated by the Australian Securities and Investments Commission.
StoneX Securities Co., Ltd. (“SSJ”) (Co. Reg. No 010401047199) is regulated by the Japanese Financial Services Agency as a Type-I Financial Instruments Business Operator (Kanto Local Finance Bureau (FIBO)No.291’), is a member of the Financial Futures Association of Japan for dealing and broking FX and FX Option transactions, and is a member of the Japan Securities Dealers Association for dealing and broking stock indices and option transactions.
Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. Past performance of any futures or option is not indicative of future success. Indicators are not a trading system and are not published as a specific trade recommendation. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.
The report/analysis herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
© 2026 StoneX Group Inc. All Rights Reserved.
Our subscribers have access to comprehensive market analysis from StoneX spanning commodities, equities, currencies and more.
There have been warnings in the last couple weeks about the approach of extremely low crude oil and oil product inventories from oil company executives and from energy agencies such as the IEA.
CFTC Report statistics and charts for the energy complex.
Baker Hughes United States Oil and Natural Gas Rig Count Summary
Our market expertise, advanced platforms, global reach, culture of full transparency and commitment to our clients’ success all set us apart in the financial marketplace.
Reach
With access to 40+ derivatives exchanges, 180+ foreign exchange markets, nearly every global securities marketplace and numerous bi-lateral liquidity venues, StoneX’s digital network and deep relationships can take clients anywhere they want to go.
Transparency
As a publicly traded company meeting the highest standards of regulatory compliance in the markets we serve; our financials and record of accomplishment are matters of public record. StoneX’s commitment to “doing the right thing over the easy thing” sets us apart in the industry and helps us build respect, client trust and new partnerships.
Expertise
From our proprietary Market Intelligence platform, to “boots on the ground” expertise from award-winning traders and professionals, we connect our clients directly to actionable insights they can use to make more informed decisions and achieve their goals in the global markets.
