Global oil reserves are shrinking as Iran war strains markets

Domestic and global oil markets are becoming increasingly vulnerable as oil inventories are being drawn down from the six-month U.S.-Iran war, The New York Times reports. 

Cushing, Oklahoma, home to the largest private oil storage site in the U.S., holds about 22 million barrels, just above the minimum needed to keep its equipment operating. Companies have been drawing down their stored oil as prices have surged, while traders expect current shortages and high prices to eventually ease.

The situation is also concerning for the federal Strategic Petroleum Reserve, which has fallen to its lowest level since 1982. The reserve is stored in underground salt caverns in Texas and Louisiana, and the government cannot completely drain them without risking damage to the facilities.

Around the world, governments and oil companies are looking to strengthen their reserves against future energy shocks. Persian Gulf producers such as Saudi Arabia want to store more oil overseas, away from potential disruptions around the Strait of Hormuz. Meanwhile, Cushing remains a major oil transportation and trading hub, connecting oil fields to refineries and ports.

For now, the world has access to enough crude oil to keep prices below the highs reached early in the war. However, the bigger constraint is a lack of refinery capacity to turn crude into gasoline and other fuels, keeping fuel prices elevated. The longer the war continues, the more fragile the global oil market becomes as inventories and available buffers continue to shrink.

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