AmericasOilWatch Weekly

Oil Has Fallen Below $75. The Fuel System Still Needs Emergency Rules.

5 August 2026

The oil market has removed almost all of the latest diplomatic-risk premium.

The American fuel system has not.

WTI fell below $75 a barrel on Wednesday morning after losing more than 11% in three sessions. Brent dropped below $79 and was down more than 12% for the week.

At almost any other point in recent history, that would have been the beginning of a simple relief story.

Cheaper crude. Lower wholesale fuel. Lower pump prices.

Instead, the White House is preparing for the possibility of extending the longest Jones Act waiver in the law's history, allowing foreign-built and foreign-crewed tankers greater freedom to move fuel between American ports.

The reason is straightforward.

Regular gasoline is still averaging more than $4 a gallon. Diesel remains above $5 — and is still rising. U.S. refineries were running at 97.2% of capacity in the last completed official report. The Strategic Petroleum Reserve has fallen below 308 million barrels. And crude prices are declining because the market believes a diplomatic settlement may restore Gulf exports—not because those exports have already returned to normal.

The screen is pricing relief.

The logistics system is still operating as though the emergency continues.

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Market Snapshot

Crude prices at approximately 03:30 GMT on 5 August. Pump prices are the latest completed EIA weekly averages, dated 3 August. Inventory and refinery data cover the week ending 24 July. The official report for the week ending 31 July is due later today.

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Oil Has Fallen Faster Than the Risk

Brent fell to approximately $78.44 a barrel early Wednesday, while WTI reached $74.70.

The decline followed reports from Qatar that mediators were making progress towards ending the Iran war and restoring traffic through the Strait of Hormuz. But Tehran continues to deny President Trump's claim that negotiations with the United States are under way.

The result is a market pricing the possibility of an agreement before an agreement exists.

Before the war, approximately one-fifth of internationally traded oil and LNG passed through Hormuz. The present price assumes that at least some of that flow will return and that the confrontation will not re-escalate.

That may prove correct.

But the current fall is a change in expectations, not yet proof of a physical recovery in Gulf exports.

This distinction matters particularly in the United States because crude prices move instantly while the fuel system moves through contracts, refineries, pipelines, terminals and retail inventories.

A $10 fall in WTI does not instantly remove the higher-cost petrol already sitting in the distribution chain.

Nor does it create spare refinery capacity.

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Washington Is Still Considering an Emergency Shipping Waiver

The clearest evidence that America's fuel problem extends beyond the crude price is the Jones Act waiver.

The Jones Act normally requires goods transported between American ports to move on vessels that are:

• built in the United States;
• owned by American companies;
• and crewed by Americans.

The current waiver permits greater use of foreign tankers to move petroleum between U.S. ports. It has already been used nearly 200 times over four and a half months and is scheduled to expire on 16 August.

Reuters reports that the White House is expected to extend it, although no final decision has been made and officials are considering narrowing its scope.

The waiver does not create fuel.

It creates logistical flexibility.

A Gulf Coast refinery may have petrol or diesel available while the East Coast or California faces a tighter local market. In normal circumstances, the requirement to use scarce and expensive Jones Act-compliant vessels can make it cheaper to export American fuel abroad while importing replacement cargoes from another country.

Relaxing the rule increases the number of tankers available to move fuel domestically.

Energy Secretary Chris Wright says the waiver has lowered prices in California and on the East Coast. Bob McNally of Rapidan Energy told Reuters that the effect is probably measured in pennies per gallon, rather than producing a dramatic nationwide fall.

That may sound small.

Across hundreds of millions of gallons, pennies matter.

But the more important conclusion is structural:

**The United States is one of the world's largest oil producers, yet it still needs emergency relief from its own coastal-shipping law to move finished fuel efficiently inside the country.**

The crude exists.

The refining and distribution geography does not always place the correct product where consumers need it.

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The Last Official Inventory Report Was Much Tighter Than It Looked

The EIA's report for the week ending 24 July showed a large commercial crude draw.

Commercial inventories fell by 7.2 million barrels to 404.5 million barrels.

The Strategic Petroleum Reserve fell another 3.8 million barrels to 307.7 million.

Together, commercial and strategic crude holdings fell by about 11 million barrels in one week.

That left:

• commercial crude 5.2% below its level a year earlier;
• the SPR 23.6% lower;
• gasoline inventories 7.5% lower;
• and distillate inventories 2.6% lower.

Those are year-on-year comparisons rather than five-year seasonal measures, but they make the direction clear.

Gasoline stocks were essentially unchanged at 211.3 million barrels.

Distillate inventories increased by 1.1 million barrels to 110.6 million, providing some welcome relief for diesel and heating-oil supply.

Jet-fuel stocks, however, fell by approximately 600,000 barrels.

Meanwhile, refineries increased crude processing to 17.34 mb/d and operated at 97.2% of capacity.

Gulf Coast refineries ran at 97.8%, while the Midwest exceeded 100% of stated operable capacity under the EIA's utilisation calculation.

That is both reassuring and uncomfortable.

The system is producing enormous quantities of fuel.

It also has very little unused refining capacity available if a major plant fails.

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Today's EIA Report Could Change the Immediate Picture

The American Petroleum Institute's provisional figures for the week ending 31 July indicate that:

• crude inventories increased by approximately 2.7 million barrels;
• gasoline stocks also increased;
• and distillate inventories fell.

The official EIA numbers are due today at 10:30 a.m. Eastern time.

Until then, the API figures should remain labelled provisional.

The composition matters more than the crude headline.

A crude build may reflect lower refinery demand, higher imports, weaker exports or timing effects. A simultaneous gasoline build could be welcome if demand has softened after the recent price surge.

A distillate draw would be less comfortable.

Diesel remains the fuel most directly connected to freight, agriculture, construction and industrial costs.

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America Exported a Record Amount of Crude While Domestic Demand Fell

The latest monthly data provide another view of the pressure inside the system.

U.S. crude production fell by roughly 2% in May from April's record, averaging 13.71 mb/d.

At the same time, crude exports reached a record 5.73 mb/d.

Foreign buyers turned towards U.S. barrels as Middle Eastern supply and shipping were disrupted.

That is a remarkable demonstration of American energy power.

The United States was able to send almost six million barrels of crude abroad each day during a global supply shock.

But the domestic economy was responding to the same prices.

Total U.S. petroleum demand fell to approximately 20.07 mb/d, its lowest level since March 2025.

Distillate demand dropped to 3.57 mb/d, the lowest since June 2020.

Some of that movement may reflect monthly volatility and statistical revisions.

But it is consistent with an economy beginning to conserve expensive fuel.

High prices solve shortages partly by encouraging more supply.

They also solve them by forcing somebody to consume less.

The May data suggest that American businesses and consumers had started doing the latter.

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Gasoline May Have Turned. Diesel Has Not.

The latest completed EIA retail data — the weekly print dated 3 August — put regular gasoline at:

$4.211 per gallon

That was down 1.7 cents in one week: the first weekly decline since the price surge began. The week before, gasoline had jumped 9.7 cents to $4.228.

Highway diesel went the other way, reaching:

$5.348 per gallon

That was up another 3.5 cents in seven days, on top of an 18-cent jump the week before.

That divergence is the story. Gasoline may be starting to respond to softer demand and the crude-price fall. Diesel is still climbing.

The crude-price collapse should eventually bring relief to both.

But the timing will depend on wholesale gasoline and diesel prices, refining margins, regional inventories and the speed at which lower-cost product replaces more expensive fuel already in the supply chain.

Diesel deserves particular attention.

A household sees the petrol price directly.

Diesel reaches the household indirectly through almost everything transported by road.

It affects:

• supermarket distribution;
• farming and food production;
• construction;
• mining;
• parcel delivery;
• public transport;
• and emergency services.

A sustained fall in crude is good news.

A fall in distillate refining margins and a rebuild in diesel inventories would be better news.

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The SPR Has Become the Quiet Constraint

At 307.7 million barrels, the Strategic Petroleum Reserve is at its lowest level since 1983.

It is almost 95 million barrels lower than a year earlier.

The reserve is doing what it was designed to do.

It has provided supply during a major international disruption and helped compensate for reduced Gulf exports.

But every emergency release reduces the volume available for the next emergency.

The immediate risk is not that America suddenly exhausts its oil supply.

Commercial inventories, domestic production, Canadian imports, refinery stocks and private storage all continue to exist.

The strategic question is optionality.

A smaller SPR gives Washington less freedom if the diplomatic opening collapses, a Gulf hurricane interrupts refinery operations or another geopolitical event removes supply before the reserve can be rebuilt.

The SPR is not the American oil system.

It is the insurance beneath it.

The policy concern is that the insurance is being used during a crisis whose final outcome remains uncertain.

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Canada Is Refusing to Weaponise Its Oil

Canada remains the most important external stabiliser in the American petroleum system.

Despite the worsening U.S.–Canada trade dispute, Prime Minister Mark Carney has played down proposals to restrict Canadian oil exports to the United States.

Carney said Canada's reputation as a reliable commodity supplier is a strategic asset that should not be damaged for short-term leverage. Alberta has also opposed export restrictions or taxes.

That is commercially rational.

Canadian producers depend heavily on the U.S. refining market, while many American Midwest and Rocky Mountain refineries are designed around Canadian heavy crude.

The relationship is not easily replaced by either side.

At the same time, Canada is trying to create alternatives.

Ottawa and Alberta have announced plans for another pipeline capable of moving approximately 1 mb/d towards the Pacific coast, allowing more crude to reach Asian markets rather than automatically moving south into the United States. Construction could begin in 2027 if regulatory, financing and Indigenous-partnership conditions are met.

Canada is therefore doing two things simultaneously:

• preserving its reputation as America's reliable supplier;
• and building the infrastructure that would make America less indispensable as a buyer.

That is not an immediate supply threat.

It is a long-term shift in bargaining power.

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Guyana Has Crossed an Important Financial Threshold

Guyana is now producing more than 900,000 b/d, making it one of the fastest-growing oil suppliers in the Atlantic Basin.

ExxonMobil and its partners have now recovered approximately $55 billion of initial development costs at the Stabroek Block, two years earlier than expected.

Under the production-sharing agreement, that changes how the barrels and revenues are divided. Guyana should receive a larger share as less production is required for cost recovery. Exxon expects to book roughly 100,000 fewer barrels per day from the third quarter as a result, although it still expects Guyana to become an increasingly important source of cash flow.

This does not reduce physical production.

It changes who receives the economic benefit.

For Guyana, it marks the transition from financing an enormous offshore build-out towards capturing more of the revenue generated by it.

For the wider Americas market, the production remains strategically valuable.

Guyana's light crude enters the Atlantic without passing through Hormuz, Bab el-Mandeb or Suez.

Every additional Guyanese barrel therefore adds supply through a route whose risks are largely separate from the Middle Eastern chokepoints.

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Venezuela Is Becoming a Real Option — but Not Yet a Reliable One

Venezuela continues moving oil ventures into its reformed contractual framework, although several negotiations have missed the original 28 July deadline.

Companies including Eni are seeking more flexible production-sharing arrangements and greater operational control.

Eni says its Junín 5 project could eventually increase from approximately 12,000 b/d to 200,000 b/d once investment resumes.

That potential matters to the United States.

Many Gulf Coast refineries were designed to process heavy sour crude similar to Venezuelan grades.

A significant recovery would provide another regional source of the feedstock those plants prefer.

But the words "could eventually" carry most of the weight.

Venezuela still faces:

• damaged infrastructure;
• accumulated debt;
• contractual uncertainty;
• shortages of equipment and skilled labour;
• and a long history of political intervention.

Its reserves are enormous.

Its dependable near-term production response remains much smaller.

Venezuela is becoming investable enough to discuss again.

It is not yet a reliable replacement for disrupted Middle Eastern supply.

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Brazil Shows the Difference Between Regulation and Supply

Brazil is simultaneously expanding oil production and making some future gas investments more difficult.

Petrobras reported second-quarter oil and gas production of approximately 3.34 million barrels of oil equivalent per day, up 14% from a year earlier.

But the company has now paused studies for a proposed $1 billion gas pipeline in Sergipe, citing regulatory uncertainty over government plans that could require producers to auction part of their gas to third parties.

The proposed policy is intended to increase competition and lower prices.

Industry participants argue that reallocating existing supply does not automatically create more gas and may weaken the investment case for producing and transporting additional volumes.

That is a useful wider lesson.

Governments can redistribute margins and change who sells energy.

They cannot regulate new molecules into existence.

Long-term supply still depends on infrastructure, capital and confidence that the agreed commercial framework will survive long enough for the investment to pay back.

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What We Are Watching

1. Today's EIA report

The API suggests crude and gasoline builds but a distillate draw.

The official figures will determine whether the U.S. fuel buffer is finally rebuilding or merely changing composition.

2. The Jones Act decision

An extension would provide continued shipping flexibility.

The precise geographic and product limits will determine how useful it is.

3. Pump-price pass-through

WTI has fallen by more than 11% this week, and gasoline has just printed its first weekly decline.

The test is how quickly the rest of the fall reaches the pump.

4. Diesel

A crude-price fall is welcome.

A sustained distillate-stock rebuild — and a turn in the still-rising retail diesel price — would be the more important signal for the wider economy.

5. Hormuz traffic

Diplomatic statements have moved oil by more than $10.

Actual tanker and export volumes will determine whether the lower price lasts.

6. The SPR

Continued emergency releases would push the reserve below an already four-decade low.

7. Gulf hurricane risk

U.S. refineries are running extremely hard during the portion of the year when Gulf Coast infrastructure becomes increasingly exposed to tropical disruption.

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AmericasOilWatch Assessment

STATUS: PRICE RELIEF — PHYSICAL SYSTEM STILL TIGHT

America is not running out of oil.

It is producing close to 14 million barrels of crude per day, exporting record volumes, processing more than 17 million barrels through refineries and drawing upon one of the world's largest emergency stock systems.

But strength in one part of the chain does not remove vulnerability elsewhere.

WTI is below $75 because the market expects diplomacy to restore Gulf supply.

Gasoline remains above $4 because retail prices lag.

Diesel remains above $5 because refined products are tighter than crude.

The White House is considering extending the Jones Act waiver because domestic geography and shipping law make it difficult to move fuel efficiently between American regions.

Refineries are operating at 97.2% because the world needs the products they make.

The SPR is below 308 million barrels because America has become part producer, part refiner and part emergency supplier to the rest of the world.

The most important conclusion this week is not that oil has fallen.

It is that the system still requires emergency measures after it has fallen.

**The futures market believes the crisis may be ending. America's fuel infrastructure is not yet behaving as though it has ended.**

That gap—between the price on the screen and the condition of the physical system—is where the next move will come from.

— AmericasOilWatch

Independent monitoring of oil supply, inventories, infrastructure, prices and energy resilience across the Americas.