U.S. Crude Oil Supply at Record Highs in June, But Falling at Fastest Rate Ever [Report]

Amid the COVID-19 pandemic, the combination of shuttered businesses and reduced car and airline transportation led to a significant decline in demand for U.S. petroleum products. As a result, the U.S. stockpile of commercial crude inventories has soared, so much so that inventories as of the week ending June 19 reached a record high.

Record High Supplies in June

U.S. commercial crude supply reached 541 million barrels on June 19, topping the previous mark of 536 set in March 2017, according to a report released late last month by the U.S. Energy Information Administration (EIA). The report also notes that commercial crude inventories do not include crude oil held in the U.S. Strategic Petroleum Reserve. As of June 19, the Reserve holds an additional 654 million barrels.

Despite the current glut of commercial crude oil, there’s still room to spare. The EIA notes that U.S. net commercial crude oil supply was at 62% of total storage capacity as of June 19. It added that in the Gulf Coast region, where most of the U.S. refining capacity is, commercial crude oil inventory has jumped by 64 million barrels since March 13 — the date the Trump administration declared COVID-19 a national emergency. Inventories have likewise increased by the following amounts at other U.S. regions since June 17 of this year:

• East Coast: +52%
• Midwest: +56%
• Crushing, Oklahoma: +58%
• Rocky Mountain: +60%
• West Coast: +68%

As the demand for crude oil sunk with the onset of COVID-19 in the U.S., so did its price. It fell so far that it actually went into the negative during April for the first time in U.S. history, falling as low as minus $37.63 per barrel. For consumers, this led to gasoline prices at or near $1 per gallon at the pump in many areas of the country before returning near $2 per gallon by mid-June.

A Big July Turnaround

Despite reporting massive surpluses of crude oil in June, the industry saw a massive rebound at the beginning of July. As a result of companies pausing production due to massive stockpiles, once crude oil demand bounced back during COVID-19 reopenings, supplies are dropping the fastest ever recorded, reaching a four-month high on July 2, according to OilPrice.com.

However, as COVID-19 cases spike in most states across the U.S., analysts are expecting more shortages to come. Despite increasing case numbers, demand for oil is still on the rise. 

"For now, data for several cities in affected states does not show a significant reduction in road traffic week-on-week,” analysts at ING bank said.

U.S. oil production is the largest in the world and is continuing to fall for the ninth consecutive week, but the decline is slowing as skyrocketing oil prices prompt producers to restart drilling operations.