Oil jumps above $80 as US emergency reserve hits 1983 low

WTI crude jumped 4.6% to $81.78 a barrel Monday after the Strategic Petroleum Reserve fell to 298.7 million barrels, the lowest level since 1983, as the Hormuz closure drains Washington's emergency buffer.

"Emergency reserves are not unlimited, and the need to replace released barrels could eventually push prices higher," said Matt Smith, chief oil analyst at Kpler.

The reserve declined by 6.1 million barrels last week, according to Department of Energy data released Monday. The stockpile held 105.3 million barrels of sweet crude and 193.4 million barrels of sour crude. The drawdown follows a 2.8 million barrel decline the prior week when inventories stood at 304.8 million barrels. The releases are part of a 172 million barrel drawdown authorized in March, with roughly 108.6 million barrels already delivered to the market.

The depleted buffer leaves Washington with limited capacity to absorb further supply shocks if the Strait of Hormuz closure persists. Helima Croft, global head of commodity strategy at RBC Capital Markets, said even an immediate agreement would take roughly six weeks to restore shipping through the strait, keeping pressure on inventories and prices.

The SPR's slide to 298.7 million barrels marks a 116 million barrel decline from mid-March levels of about 415.4 million barrels. The reserve has not been this low since January 1983, when the EIA began publishing weekly data. The drawdown compounds a historic depletion that began in 2022, when the Biden administration released 180 million barrels in response to Russia's invasion of Ukraine. Inventories stood near 600 million barrels at the start of 2022 and fell to 375 million by year-end.

The current releases are structured as exchanges, requiring companies to return borrowed volumes with a premium at a later date, according to the Energy Department. The SPR, stored in underground salt caverns along the Gulf coasts of Texas and Louisiana, has an authorized capacity of about 714 million barrels and a maximum drawdown capability of 4.4 million barrels per day.

Hormuz Closure Reshapes Global Supply

The Strait of Hormuz closure has interrupted the movement of more than 1.2 billion barrels of oil, according to S&P Global Energy. Brent crude rose 4.7% to $87.45 a barrel Monday, adding to a 24% monthly gain in July that marked its strongest performance since March. The waterway, through which roughly one-fifth of global oil supply previously passed, has remained largely blocked after months of military confrontation involving the United States, Israel and Iran.

Nearly half of the oil released from US reserves during April and May was directed toward export markets in Europe and Asia. That decision helped stabilize international supply chains but reduced the crude available for domestic shortages. In Cushing, Oklahoma, inventories fell to 24.5 million barrels, approaching the technical operating floor of roughly 20 million barrels. Trump has also pressured ExxonMobil and Chevron to lower consumer fuel prices, accusing the majors of profiting from the conflict.

Rebuilding the Buffer

Replenishing the reserve would require purchasing large volumes of crude, potentially increasing demand and pushing prices higher. The last time the SPR fell to a comparable level — about 347 million barrels in the summer of 2023 — it took nearly two years to rebuild to 400 million barrels by May 2025. The current drawdown has been far more rapid, with Trump warning on June 17 that the reserve could be depleted within four weeks at the pace of extraction at that time.

The administration has also faced criticism for releasing reserves after Trump previously condemned similar actions during Biden's presidency. In 2023, Trump called the then-347 million barrel level a threat to US energy security. The current conflict with Iran has led to record withdrawals, with nearly 9.9 million barrels released in a single week in mid-May, reducing the stockpile by roughly 10 percent to 374 million barrels.

The Government Accountability Office issued a report in May warning that Congress and the Energy Department need a unified long-term plan for SPR maintenance and inventory management. The One Big Beautiful Bill Act, enacted in July 2025, included $171 million for acquiring petroleum products for the reserve and $218 million for maintenance.

For consumers, the immediate impact is visible at gas stations, but the broader consequences extend to transportation, manufacturing, agriculture and household budgets. Sustained crude above $80 a barrel could feed inflationary pressures, influence Federal Reserve policy expectations and boost energy sector equities. If the Hormuz closure continues, governments may face pressure to ration supplies, redirect exports or increase production despite environmental and infrastructure constraints. A prolonged crisis would test both US energy policy and the resilience of the global economy.

This article is for informational purposes only and does not constitute investment advice.