US oil reserves dropping sharply? Global oil prices swing as war disrupts supply and demand

US oil reserves dropping sharply? Energy markets face major supply pressure as war in the Middle East disrupts global oil flows. Prices moved sharply after reaching a four-year high. The Strategic Petroleum Reserve continues to decline while exports reach record levels. Fuel costs affect transport, airlines, goods, and food supply chains. Natural gas markets also show supply and demand shifts. This explainer details oil prices, reserves, fuel costs, shipping disruptions, and global economic effects.

US oil reserves dropping sharply?

Global oil markets remain volatile as war tensions affect supply routes, stockpiles, and demand. Prices surged earlier but later eased during trading. The changes reflect uncertainty in supply chains and global demand.

Oil prices retreat after reaching four-year high

Brent crude futures reached $126.41 per barrel, the highest since March 2022. Prices later settled at $114.01, down $4.02. The July contract settled at $110.88. WTI crude closed at $105.07 after earlier reaching $110.93. Both benchmarks remain on track for a fourth month of gains due to supply fears linked to the Iran conflict.


Analysts said market movements show volatility without a single clear trigger. Large sell orders and contract expiries contributed to price swings. Hedge funds also sold positions to lock in gains. The US dollar weakened against the yen after warnings from Japan about possible intervention. Currency movements also pressured oil prices.

The US plans fresh military strikes on Iran while Iran warned of long strikes if attacks continue. Iran also reasserted control over the Strait of Hormuz. About one-fifth of global oil passes through this route. Brent prices have doubled since the conflict began.

Strategic Petroleum Reserve and exports

The Strategic Petroleum Reserve fell by 7.12 million barrels in one week. This was the largest weekly drawdown since October 2022. It marked the fifth consecutive weekly decline. Total SPR reserves fell by 17 million barrels over five weeks. The level now stands at 398 million barrels. This is the lowest since April 2025.

US oil and fuel exports exceeded 14 million barrels per day for the first time. Overseas buyers seek alternatives to Middle East supply. Commercial crude stocks fell by 6.23 million barrels. Gasoline stocks fell by 6.08 million barrels. Distillate stocks fell by 4.49 million barrels. Gasoline supplies reached the lowest seasonal level since 2014. Global demand for US oil reached record levels.

Shipping traffic falls in Strait of Hormuz

Shipping traffic through the Strait of Hormuz dropped sharply. Only seven ships crossed in 24 hours. Before the war, 125 to 140 vessels travelled daily. The UAE announced plans to exit OPEC after nearly 60 years. Analysts say the strait closure outweighs long-term group changes. High oil prices may reduce demand and ease supply pressure over time.

Fuel prices rise and affect consumers

Gasoline prices in the US reached the highest level since 2022. The national average rose to $4.30 per gallon from $2.98 before the war. Diesel rose to about $5.50 per gallon from $3.76.

Shipping costs increased as companies added fuel surcharges. The US Postal Service added an 8% temporary charge. Amazon added a 3.5% fuel surcharge for sellers. Higher transport costs raise prices for goods like clothing, cosmetics, and furniture.

Air travel and airline costs increase

Jet fuel prices rose sharply earlier and remain high. Airlines increased baggage fees and ticket prices. Some airlines added charges for seat selection. Flight schedules were reduced and some routes were cut. Lufthansa plans to cancel about 20,000 flights over six months.

Consumer goods and groceries may rise

Procter & Gamble warned of a $1 billion profit hit due to fuel and material costs. Unilever plans price increases of 2% to 3%. Fuel makes up 15% to 30% of food costs. Fertilizer shipments also pass through the Strait of Hormuz. Food prices may rise after a lag of three to six months. The UN World Food Program estimates 45 million more people could face hunger if the conflict continues. Global food insecurity could reach 363 million people.

Natural gas markets show mixed signals

US natural gas futures rose to $2.767 per mmBtu, a three-week high. LNG exports remain near record levels while output declines. Gas storage increased by 79 billion cubic feet. This was near forecast levels. Mild weather reduced heating demand. Waha Hub prices stayed negative for 59 days due to pipeline limits in the Permian region. Prices averaged negative $2.16 per mmBtu in 2026. US gas output fell to 110 billion cubic feet per day in April. Daily output dropped further due to production cuts. LNG export flows rose to 18.8 bcfd. Demand is expected to fall from 102.9 bcfd this week to 99.9 bcfd next week.

Global economic outlook

High oil prices risk higher inflation and fuel costs worldwide. Oil and gas remain key for transport, electricity, plastics, and fertilizers. Market volatility continues as the conflict remains unresolved. Analysts say reopening the Strait of Hormuz appears unlikely soon.

FAQs

Q1. Why are fuel and airline prices rising now?
Fuel prices rise due to supply disruptions, rising oil costs, and shipping limits. Airlines face higher jet fuel costs, leading to higher ticket prices, baggage fees, and reduced flight schedules globally.

Q2. How do falling US oil reserves affect global markets?
Lower reserves signal tighter supply. Rising exports increase demand pressure. This combination pushes prices higher, increases inflation risk, and raises costs for transport, goods, and food supply chains worldwide.