Crude Oil Prices Decline Amid Unexpected US Inventory Buildup

Concerns about the U.S. economy following Moody’s credit rating downgrade also put a downward pressure on prices.

A sign displays the price of gas at more than $6 per gallon, at a gas station in Alhambra, Calif., on Sept. 18, 2023. Frederic J. Brown/AFP via Getty Images

An unexpected increase in U.S. crude oil stocks contributed to a drop in oil prices in early morning trade on May 22.

A May 21 report from the Energy Information Administration stated that for the week ending on May 16, “U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.3 million barrels from the previous week.”

“At 443.2 million barrels, U.S. crude oil inventories are about 6 percent below the five-year average for this time of year,” the report reads.

The 1.3 million barrel jump in oil stocks came as markets expected a dip in inventories.

A buildup in inventory happens due to multiple factors, such as an increase in production or a decline in demand. Rising levels of inventory suggest market oversupply or that people are using less fuel than normal. This puts downward pressure on oil prices.

Brent crude oil futures were trading at $63.93 per barrel as of 6:15 a.m. EDT on May 22, down 1.51 percent.

The national average price of regular gas was $3.19 per gallon on May 22, down by more than 11 percent from the $3.61 a year back, according to data from the American Automobile Association (AAA).

Gas was expensive in California, Hawaii, and Washington, with prices exceeding $4 per gallon. The cheapest prices were recorded in Mississippi, Louisiana, and Alabama, with gas costing $2.75 per gallon or less.

Crude oil futures had fallen for the past two days, with the May 22 decline the third straight fall on a daily basis.

Recent declines follow Moody’s downgrading of the U.S. credit rating from AAA to AA1 on May 16.

Moody’s justified the downgrade, saying the fiscal health of the government was deteriorating, highlighting the debt burden facing the country.

A lower credit rating is typically seen as bad news as it suggests the nation could be facing financial trouble. Given that the United States is the largest consumer of oil in the world, concerns about its financial state can depress oil prices.

Treasury Secretary Scott Bessent dismissed the downgrade, arguing that achieving faster economic growth is more important than the growth in debt. Bessent said the Trump administration will boost government finances by reducing spending and deregulating the economy.

Memorial Day Gas Prices

AAA predicted that 45.1 million Americans will travel at least 50 miles from their homes during the Memorial Day holiday period from May 22 to May 26—a jump of 1.4 million travelers from 2024—the group said in a May 12 post.

“This year, drivers have the benefit of cheaper gas prices. Last Memorial Day, the national average for a gallon of regular was $3.59. This spring—thanks to lower crude oil prices—gasoline prices haven’t seen typical seasonal spikes,” it said.

“With the unofficial start of summer kicking off the busy driving season, demand is expected to rise, and pump prices may creep up along with it.”

Fuel savings platform GasBuddy expects prices to lower rather than increase, it said in a May 20 post, forecasting the Memorial Day national average gasoline price to be $3.08 per gallon, down significantly from $3.58 in 2024.

Lower gasoline prices are the result of cheaper oil prices amid a jump in production from OPEC+, ongoing economic uncertainties, and a potential nuclear deal with Iran, according to GasBuddy analysis.

“As summer progresses and refinery maintenance concludes, the national average price of gasoline could fall below $3 per gallon at times this summer,” it said.

Gasoline prices may get cheaper over the coming years as the Trump administration takes steps to boost energy production.

On Feb. 14, President Donald Trump signed an executive order creating a National Energy Dominance Council.

According to a White House fact sheet, the council will advise the president on achieving energy dominance by “improving the processes for permitting, production, generation, distribution, regulation, and transportation across all forms of American energy.”

In April, the Trump administration signaled a major expansion of offshore drilling that could open vast areas, such as those in the Arctic region, to energy production.