MW Record oil exports could drive U.S. diesel and gas supply shortages just as summer travel starts

By Myra P. Saefong

Diesel supplies sink to about a 20-year low as prices jump to $5.67 a gallon nationally - and it isn't yet peak summer travel

A driver fills up with diesel fuel at a truck stop on April 6, 2026, in Belvidere, Ill. Diesel prices are climbing amid the Iran war.

Oil supplies globally have contracted on the back of transport and production disruptions from the Iran war, with the U.S. lending a helping hand to replenish stocks with its ability to produce more of the commodity than anyone else in the world.

Yet the stunning recent drop in domestic supplies may soon backfire as the summer travel season approaches. That's when the nation typically sees a jump in demand for oil, along with the products refined from it, including gasoline and diesel.

The nation's oil-product supply levels are "problematic because we've become swing producers for the global economy," said Robert Yawger, director of energy futures at Mizuho Securities USA.

The Energy Information Administration reported a large 24.1 million-barrel total weekly decline in oil and oil-product supplies, including stocks in the Strategic Petroleum Reserve $(SPR)$, for the week ending April 24. The week before that, the week-to-week decline was at just under 6 million barrels.

U.S. exports of oil and oil products were at 14.2 million barrels per day as of the week ending April 24, according to the EIA. That's the largest weekly figure based on EIA records dating back to 1991.

The U.S. exported more oil and gas and diesel than ever before, said Phil Flynn, senior market analyst at The Price Futures Group. That's an "amazing achievement" and makes the U.S. a reliable "exporter of last resort."

Read: The secret to lowering gas prices in the U.S.? Selling American oil overseas.

Given the inventory drawdowns, Jeff Currie, chief strategy officer of Energy Pathways at Carlyle, told Bloomberg in a TV interview Wednesday that he's anxious to know what supplies will look like when travel tends to pick up around Memorial Day - this year on May 25 - and during the Fourth of July holiday. Those are periods of higher demand for the fuels needed to run cars and airplanes.

For now, the U.S. and Europe are experiencing a deficit in oil and oil-product supplies - meaning demand is outpacing supply - but haven't reached a shortage of inventories, Currie said.

Europe and the U.S. will remain in a shortfall until they "hit tank bottoms" and supply runs out, leading to a shortage, he said. That could happen in Europe sometime this month, he said. In the U.S., that may happen around the July 4 period or sooner.

Problematic oil-product supplies

For now, U.S. crude-oil inventories, excluding stocks in the Strategic Petroleum Reserve, stand at 457.2 million barrels, or about 1% above the five-year average for this time of year, according to the EIA.

Crude-oil storage is still at a good level, said Yawger of Mizuho Securities USA. The same can't be said about oil-product supply levels, however.

U.S. oil-product storage levels are "starting to slide off the face of the earth," said Yawger.

Supply of distillates, which are products refined from crude oil and include diesel, has reached a roughly 20-year low at 102.3 million barrels in Wednesday's EIA report, Yawger said. EIA data show that the U.S. hasn't seen a level that low since 2003.

Even if the war were to end tomorrow, diesel prices would still be elevated, Yawger said, because the U.S. has drawn down storage levels to "export barrels to everybody else in the universe."

U.S. diesel prices averaged $5.67 a gallon on Wednesday, up from $3.54 a year earlier, according to AAA.

Yawger said he doesn't think the supply is quite as bad for gasoline yet, but supplies are starting to tighten. Total inventories of motor gasoline fell by 2.5 million barrels in the latest week and sit 4% below the five-year average for this time of year, EIA data show.

'We are happy to supply everybody during the war, but now we're running into a shortage of our own making.'Robert Yawger, Mizuho Securities USA

The U.S. is drawing down gasoline supplies when it's supposed to be building supplies, getting ready for summer driving season, said Yawger.

That means gas prices will be elevated - threatening a rise to $5 a gallon - even if the war ended tomorrow, he said. The nation's average price topped $4.50 Wednesday for the first time since July 2022.

The rise in gasoline prices follows a roughly 30% rise in U.S. West Texas Intermediate crude prices (CL.1) since the start of the Iran war.

Overall, U.S. oil-product inventories are becoming an issue, said Yawger. "We are happy to supply everybody during the war, but now we're running into a shortage of our own making."

-Myra P. Saefong

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 07, 2026 08:49 ET (12:49 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.