The U.S. oil market is flashing ever more signs of tightness and supplies can barely keep up with a scorching surge in fuel demand. 

Last week crude stockpiles in one of the biggest oil consumers in the world plunged to the lowest since 2018, with inventories at a key storage hub falling toward critical levels.  At the same time, the four-week average for total oil product supplied, a proxy for demand, surged to nearly 22 million barrels a day, the highest on record.  

The tightness in U.S. markets has vaulted oil and retail fuel prices to levels not seen since 2014 - a key source of concern for consuming nations due to the economic impact of high energy costs. A surge toward $100 a barrel will stoke further worries about inflation, that is already at multi-year highs in many countries. 

“The oil market is too tight,” said Ed Moya, senior market analyst at OANDA. “The outlook for consumption continues to improve domestically and across Europe, which means that West Texas Intermediate crude might not have much resistance getting to the $95 region this month,” he said. 

While gasoline demand has turned a corner from winter lows and is near pre-pandemic levels, consumption of diesel, heating oil, and propane are underpinning the fresh record. Demand for fuels has been boosted by cold weather in many parts of the U.S., adding to the broad recovery from the lows seen during the Covid-19 pandemic. 

The rolling average for distillates consumption rose to the highest level since 2007 after back-to-back winter storms drove demand for heating and power generation in the Northeast. In the rest of the country, highway trucking demand has remained strong as well, exceeding 2019 levels for January, according to data from the Federal Highway Administration.

The four-week average for gasoline consumption rose for a second straight week and the weekly demand figure was the highest for this time of year since 2007. 

The result is total inventories of crude and oil products combined haven’t been this low since 2015.