US Oil Reserve Runs Dry Amid Refining Capacity Crisis

The US strategic oil release is behind schedule by six weeks and is running low on usable oil before the midterms, leaving Washington without a major lever to hold back a potential siege. The Strategic Petroleum Reserve (SPR) has only 50mb of the 172mb undelivered oil left in storage, with just 12mb unassigned.

The US Treasury and the Federal Reserve intervened jointly with Tokyo on July 31st by selling euros for yen and opening a repo line to help Japan borrow dollars against its $1.116tn of Treasuries. This move allowed Japan to avoid selling its Treasuries, which would have had significant market implications.

The global refining capacity has plummeted from 11.12 million barrels per day (mb/d) in 2020 to 2.82 mb/d in 2026, a 75% collapse that severely limits diesel and gasoline supply, regardless of how the Hormuz situation resolves.