The U.S. Oil Reserve is at a 40-year Low - but the Government Says There's Still Plenty of Breathing Room

Energy Department says operational minimum for the storage caverns is about 70 million barrels, a level far lower than oil industry estimates

Crude stockpiles in the U.S. Strategic Petroleum Reserve have fallen to a more-than-40-year low. Above is a facility at the Bryan Mound site in Freeport, Texas.

Commodity experts on Wall Street have long been fixated on the risks associated with U.S. emergency crude-oil supplies running too low. The Department of Energy says they've got it all wrong.

The U.S. Strategic Petroleum Reserve, the world's largest publicly known supply of emergency crude oil, has fallen to a more-than-40-year low. That's set off alarm bells on Wall Street.

With U.S. commercial crude inventories and supplies in the SPR falling again last week, there's "less breathing room" in terms of supplies at a time of "intense global uncertainty," said David Russell, global head of market strategy at TradeStation, in emailed commentary. "The SPR draws can't continue forever."

The SPR was authorized by Congress to hold up to 714 million barrels and it's down to less than half that, at 316.5 million barrels as of the week ended July 10, according to a report from the Energy Information Administration released Wednesday.

Stockpiles were down 3 million barrels from a week earlier and at the lowest level since 1983 for the SPR, which was established in the wake of the Arab oil embargo in the 1970s to deal with crude shortages.

A slowdown in oil imports from China and a rapid initial drawdown in U.S. emergency reserves have been credited with keeping global crude prices (CL.1) (BRN00) below $100 a barrel, but America's crude stockpiles have been dwindling since the U.S. and Israel attacked Iran in late February. The U.S. in March authorized the release of 172 million barrels of oil from the reserve over a period of about 120 days. Even so, today's lower reserve levels may not as tight as market experts think.

The oil industry has generally accepted that the operational minimum for oil in the SPR, a point at which it would be more difficult to pump out the oil, is somewhere between 250 million and 300 million barrels. Meanwhile, sizing studies done on the SPR in the 1970s recommended an inventory minimum of 250 million barrels.

An Energy Department statement to MarketWatch on Wednesday indicated that the industry assertion of a "minimum operating level" of 250 million barrels is incorrect.

This comes as the U.S.-Iran cease-fire agreement from June has collapsed in recent days. President Donald Trump wants to exert more control over shipping through the Strait of Hormuz, and on Wednesday evening another round of U.S. military strikes took place against Iran.

Meanwhile, the Energy Department said the SPR's minimum inventory is determined by "cavern mechanics" that when applied across the full system translates to a "conservative operational minimum of about 70 million barrels," the DOE spokesperson said. That may leave more to spare for emergencies - around 246 million barrels, according to the DOE's latest estimates.

The SPR's release of oil this year is part of the International Energy Agency's agreement to release 400 million barrels of oil from its members' emergency reserves to offset losses from the maritime shipping disruptions at the Strait of Hormuz, which handled about 25% of the world's seaborne oil trade before the Iran began.

That 70 million barrels might be the minimum operation levels based on technical considerations, but the DOE seems to "assume optimal operations," said Michael Lynch, president of Strategic Energy & Economic Research.

He thinks it's likely to become more difficult to extract the remaining oil in the reserve as the market gets closer to the minimums. And the lower the SPR gets, the more traders are going to "worry that oil will not be available, even if the technical minimum hasn't been reached," said Lynch.

Keep in mind, however, the SPR isn't only a reserve to draw from during oil-supply emergencies. It works like an exchange - where barrels are made available by the government to energy companies, which are then required to replace those barrels, plus some, at a later time.

In March, U.S. Energy Secretary Chris Wright said the U.S. had arranged to replace the 172 million barrels of SPR oil with about 200 million barrels within the next year, which is 20% more than the drawdown.

Trump and Wright are managing the SPR as the "critical national-security asset it was designed to be, helping stabilize oil markets, protect Americans from supply disruptions, and strengthen energy security at home and abroad," the Energy Deptartment spokesperson told MarketWatch.

The Trump administration exchanged barrels released from the SPR for lower-cost barrels that will be delivered back to the reserve starting early next year, the statement said.

Those exchanges would more than replace the 172 million-barrel release, it said.

-Myra P. Saefong

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July 15, 2026 16:52 ET (20:52 GMT)

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