AmericasOilWatch Weekly | Gasoline tops $4 as WTI climbs above $85

US production is running near 13.9 million barrels a day, but thin inventories, a refining system near its limit and renewed Middle East fighting are pushing fuel prices sharply higher.

Dear Subscriber,

America's oil system presents an apparent contradiction.

Domestic crude production is running close to 13.9 million barrels per day. Refineries are operating at more than 96% of capacity. The United States remains a major exporter of crude and refined products.

Yet the national average gasoline price has moved back above $4 per gallon, diesel is above $5, commercial crude inventories are below their seasonal norm, and the country is continuing to release oil from the Strategic Petroleum Reserve.

The contradiction disappears once crude oil and usable fuel are treated as different things.

America has abundant upstream production. What it does not currently have is abundant spare refining capacity, comfortable product inventories or insulation from the global shipping system.

The United States may produce its own barrels. It still buys gasoline and diesel in a global market.

Market snapshot

Crude prices are time-stamped at 03:30 GMT on 22 July. Retail prices are AAA's national averages for 21 July. The petroleum-balance figures are EIA's weekly series for the week ending 10 July (released 15 July); the next release, covering the week ending 17 July, is due after 10:30 a.m. Eastern on 22 July.

The war premium is returning

WTI rose to $85.16 a barrel early Wednesday, while Brent reached $92.01.

The immediate cause is renewed escalation in the Middle East. US forces conducted an eleventh consecutive night of strikes on Iranian targets, while Iran attacked US facilities in Bahrain, Kuwait and Jordan. At the same time, Yemen's Houthis threatened vessels carrying Saudi oil through Bab el-Mandeb.

Three tankers loaded with Saudi crude for buyers in China and India turned around in the Red Sea rather than continuing past the Yemeni coast. The alternative route requires vessels to move north towards Suez, adding time and expense to voyages originally intended to travel south towards Asia.

This matters to the Americas even though the United States imports relatively little crude directly from the Persian Gulf.

Oil is globally priced. A disruption that removes Saudi, Iraqi, Kuwaiti or Emirati barrels from Asian markets forces Asian buyers to compete for Atlantic Basin, West African, Brazilian, Canadian and American supply.

The physical barrel may never approach the United States. The competition for it still affects the price paid in Texas, California and New York.

Gasoline has crossed $4 again

AAA's national average for regular gasoline reached $4.019 per gallon on 21 July, up from $3.859 one week earlier. Diesel rose to $5.142, compared with $4.882 a week earlier.

Gasoline is now about 88 cents more expensive than a year ago. Diesel is roughly $1.42 higher.

The speed of the increase is important.

This is not simply crude oil rising and mechanically passing through to the forecourt. Refined-product markets are under their own pressure because part of the world's refining system is unavailable or operating below capacity.

The International Energy Agency reported that global refinery runs in June remained approximately 6 million barrels per day below the previous year's level. Middle Eastern export refineries had not fully restarted, Russian throughput had been curtailed by attacks, and Asian refineries were still operating at reduced rates. Product cracks and refining margins consequently reached four-year highs in early July.

That is why gasoline and diesel can rise faster than crude.

A country can possess ample crude oil and still experience an expensive fuel market if there is insufficient capacity to turn the crude into the precise product, specification and location consumers require.

High production has not rebuilt the buffer

The latest EIA report puts US crude production at 13.861 million barrels per day, 486,000 b/d above the corresponding week in 2025.

Refineries processed 17.123 million b/d and operated at 96.2% of capacity. Those are strong operating numbers.

But the inventory position beneath them is much less comfortable:

• Commercial crude stocks fell by 1.7 million barrels to 409.7 million, around 6% below the five-year seasonal average.
• Gasoline stocks fell by 1.5 million barrels to 210.5 million, around 8% below the five-year average.
• Distillate stocks rose by 4.6 million barrels to 108.2 million, but remained approximately 11% below the seasonal average.

The demand data do not show an extraordinary American consumption boom.

Four-week gasoline supplied averaged 8.9 million b/d, down 1.1% from a year earlier. Distillate supplied averaged 3.7 million b/d, down 2.1%. Jet-fuel demand was higher, but only by 2.3%.

This suggests that the immediate price pressure is not predominantly the result of runaway domestic demand.

It is the result of a tight product system meeting renewed geopolitical disruption with little spare refining capacity and thinner-than-normal inventories.

Cushing is approaching its physical floor

The most revealing US number may not be the national crude total. It may be the inventory at Cushing, Oklahoma.

Cushing stocks fell from 21.64 million barrels on 5 June to 18.96 million on 19 June. They remained below 20 million through early July before edging up to 20.044 million barrels in the week ending 10 July.

EIA has warned that these levels may be close to what storage operators describe as tank bottoms.

A storage tank cannot normally be pumped completely empty. A minimum volume must remain in tanks and connected pipework to maintain suction and allow the system to operate. Once inventories approach that physical floor, some barrels counted in the headline total may not be practically deliverable.

EIA noted that low Cushing inventories helped push WTI above Brent during parts of June and July — an unusual price relationship that indicated extreme tightness in the mid-Continent crude market.

This gives the published inventory number a different meaning.

Twenty million barrels at Cushing does not mean twenty million freely available barrels. The closer the system moves towards tank bottoms, the smaller its genuinely usable buffer becomes.

This is the same distinction that applies throughout energy infrastructure:

Nominal capacity is not the same as deliverable capacity.

The SPR is still cushioning the market

The Strategic Petroleum Reserve held 316.5 million barrels on 10 July.

That was down 3 million barrels in one week and 86.2 million barrels lower than a year earlier.

The draw is part of the response to the Middle East supply disruption. In March, the Department of Energy committed to make 172 million barrels available from the SPR as the US contribution to the IEA's unprecedented 400-million-barrel coordinated action.

DOE said the release would take approximately 120 days to deliver. It has structured much of the operation as an exchange, under which companies are expected to return the borrowed oil later with additional barrels as a premium.

That structure may eventually replenish the reserve. It does not alter the immediate position: strategic stocks are currently being converted into market supply while the war continues.

The SPR is doing precisely what an emergency reserve was created to do. But its intervention also means current prices do not reflect the geopolitical disruption alone. They reflect the disruption after government barrels have already been added to the market.

Without those barrels, the market would be tighter.

America cannot refine its way out much faster

US refinery utilisation of 96.2% sounds reassuring, and in one sense it is. Refineries are operating hard and converting large volumes of crude into transport fuels.

But a system running above 96% does not possess much unused capacity.

A refinery cannot sustainably operate every unit at full theoretical capacity indefinitely. Plants require maintenance, individual units fail, crude grades vary, and seasonal fuel specifications change.

Higher utilisation can increase output. It also reduces the margin available to compensate when a major plant, pipeline or processing unit goes offline.

This is the central risk for the remainder of the summer:

Global product supplies are constrained while the US refining system is already working close to its practical limit.

America may be able to increase crude production. New crude production does not instantly create additional hydrocracking, catalytic cracking, desulphurisation or product-distribution capacity.

The bottleneck is increasingly what happens after the oil leaves the well.

Drilling is responding — but barrels take time

The US oil and gas rig count rose by seven during the week ending 17 July to 588 rigs, 44 higher than a year earlier (Baker Hughes).

Canada's rig count rose by 19 to 198, 26 above the corresponding week in 2025.

That is evidence that North American producers are responding to stronger prices and supply uncertainty.

It is not an immediate solution.

A rig counted this week must drill, complete and connect a well before production reaches the market. Canadian activity is also strongly seasonal, so a weekly increase should not automatically be interpreted as a permanent acceleration.

More importantly, an additional barrel of crude does not resolve a shortage of diesel or gasoline unless corresponding refining and transport capacity exists.

The upstream response is strengthening. The downstream constraint remains.

Venezuelan crude is moving closer to refiners

A second Americas development is taking place in Venezuela.

Reuters reports that refiners and international oil companies are moving towards more direct supply arrangements with PDVSA. Phillips 66 resumed direct spot purchases in May, while Valero was expected to follow but had not yet received loading windows by mid-July. Chevron, Repsol and Eni are also expanding direct Venezuelan crude movements and joint-venture activity. Venezuela's crude output is currently reported at around 1.2 million barrels per day, with the government targeting 1.37 million b/d by year-end.

This is not enough to neutralise a major Middle Eastern disruption.

But it does add another stream of Atlantic Basin supply and illustrates how the market is adapting: refiners are trying to secure physical barrels directly rather than relying entirely on traders and spot availability.

The decisive question is not merely whether Venezuela produces more oil. It is whether those barrels reliably reach refineries able to process them, under commercial and sanctions arrangements that remain stable long enough to support investment.

What today's EIA report must answer

The next official Weekly Petroleum Status Report is scheduled for release after 10:30 a.m. Eastern Time on 22 July, covering the week ending 17 July.

Five figures matter most:

• Gasoline inventories: Another draw would deepen concern during the summer driving season.
• Distillate inventories: The headline build last week was welcome, but stocks remain far below their five-year seasonal norm.
• Cushing: A move back below 20 million barrels would reinforce EIA's tank-bottom warning.
• Refinery utilisation: There is little room for a material decline without tightening product markets further.
• SPR stocks: Continued withdrawals show how much of the market's supply is coming from emergency rather than ordinary commercial sources.

American Petroleum Institute figures reported overnight pointed towards higher crude and distillate stocks but lower gasoline inventories. Those estimates should not be treated as confirmed until the EIA data are published.

The barrel is abundant. The buffer is not.

The United States is not running out of oil.

It is producing close to 13.9 million barrels every day, operating refineries at high rates and drawing additional crude from the Strategic Petroleum Reserve.

But production alone is not the correct measure of security.

The country's gasoline and distillate inventories remain below normal. Cushing is close to its practical operating floor. Refineries have little unused capacity. Emergency stocks are being released into a market still exposed to Hormuz, Bab el-Mandeb and a global refining shortfall.

The US shale industry solved one problem: access to crude oil.

It did not abolish the refinery, the storage tank, the pipeline, the product terminal or the maritime chokepoint.

America's present position is therefore stronger than that of most oil-importing economies — but less insulated than its production figures imply.

The barrel is abundant.

The usable buffer around it is not.

Prices and market conditions are time-stamped and may change after publication. AAA retail averages are for 21 July; Baker Hughes rig counts are for the week ending 17 July; EIA petroleum-balance figures refer to the week ending 10 July (released 15 July) because the 22 July release had not been published at the time of writing.