Oil Prices Dip Amid Geopolitical Tension, US Inventories Plunge

Oil prices edged lower Tuesday, with West Texas Intermediate (WTI) crude settling at $104.11 per barrel, down 0.26% on the day, according to live market data. Brent crude closed at $111.04, a decline of 0.95%. The dip came amid volatile trade as the market weighed renewed geopolitical tensions after U.S. President Donald Trump paused plans to attack Iran, Rigzone reported.

The price retreat occurred despite a massive drawdown in U.S. commercial crude inventories. The American Petroleum Institute (API) estimated a 9.1 million-barrel draw for the week ending May 15, far exceeding analyst expectations for a 3.4 million-barrel decline, according to OilPrice.com. This follows a 2.188 million-barrel draw the prior week.

However, total U.S. crude inventories remain elevated, having risen by 26 million barrels so far this year, API data shows. In a parallel move, the U.S. Strategic Petroleum Reserve (SPR) saw a historic single-week drawdown of 9.9 million barrels, bringing the total to 374.2 million barrels—the lowest level since July 2024.

For Bakken producers, the key local pricing benchmark, the Bakken differential, held at -$3.42 versus WTI on Tuesday. This places Bakken crude at approximately $100.69 per barrel at the wellhead, sustaining a strong price environment for operators in North Dakota's primary oil-producing region.

Supporting the overall market, U.S. production rose to 13.710 million barrels per day (bpd) for the week ending May 8, up from 13.573 million bpd the week prior, according to the latest Energy Information Administration (EIA) data cited by OilPrice.com. Production is up 323,000 bpd from a year earlier.

Product inventories also tightened significantly. Gasoline stocks drew down by 5.8 million barrels last week, while distillate inventories fell by 1 million barrels, the API reported. As of the week ending May 8, gasoline inventories were already 5% below the five-year average and distillates were 9% below, according to EIA data. This tightening in refined products, combined with a warning from GasBuddy that the next U.S. gasoline price spike "could arrive just before Memorial Day," points to underlying strength in fuel demand.

Storage levels at the Cushing, Oklahoma, hub—the delivery point for WTI—fell by 1.4 million barrels over the reporting period, providing further support to the benchmark price.

Despite the day's slight decline, both WTI and Brent crude remain up roughly $2 per barrel week-over-week, indicating a firm underlying market. The combination of substantial inventory draws, strong refinery demand for products, and geopolitical uncertainty continues to create a volatile but high-priced environment, benefiting Bakken operators with wellhead prices firmly above $100 per barrel.