The U.S. Oil Sector’s Role in Restraining Prices

The start of the Middle East conflict in early 2026 caused an unprecedented drop in global petroleum supply. In response, oil prices jumped—but not to unprecedentedly high levels. The U.S. oil sector was a key factor in moderating the shock. For one, its steady increases in drilling helped create a large oversupply in the global market before the conflict, making it less of a challenge to offset the drop in Middle East oil output. In addition, U.S. commercial and government inventories were rapidly drawn down, filling half the gap between global supply and demand in the second quarter by some estimates. Inventories, though, are a limited resource and U.S. stockpiles stopped falling in July. As a consequence, the continued shortfall in global production has been managed by running down inventories in the rest of the world.