Chevron and Exxon warn oil could hit $160 as inventories plunge

According to the International Energy Agency, global oil inventories declined by 129 million barrels in March and by 117 million barrels in April. These consecutive monthly drawdowns indicate sustained global supply tightness.

For the week ending May 22, U.S. commercial crude oil inventories fell by 3.3 million barrels to 441.7 million barrels. This level was reported as 2% below the five-year average for the same period.

The U.S. Strategic Petroleum Reserve decreased by 9.1 million barrels, reaching a total of 365.1 million barrels. This represents a significant draw from the nation’s emergency oil stockpile.

Both Mike Wirth of Chevron and Neil Chapman of Exxon attributed the risk of a sharp oil price increase to rapidly declining global stockpiles and the market’s inability to absorb ongoing supply shocks from the U.S.-Iran conflict. They emphasized that these combined factors are straining the oil supply system. The linkage underscores geopolitical and supply-side pressures on the market.

The executives from Chevron and Exxon pointed to the U.S.-Iran conflict as a continuing source of oil supply disruptions. These disruptions are contributing to market instability and the risk of higher prices.

Recent military incidents in the region underscore that instability persists despite the reported preliminary ceasefire extension agreement between the U.S. and Iran. These incidents contribute to uncertainty in oil markets and shipping security.

Reports indicate that the United States and Iran have reached a preliminary agreement to extend the existing ceasefire for an additional 60 days. This development is part of ongoing diplomatic efforts between the two nations.

The U.S. national average gasoline price fell by almost 17 cents over the course of the past week. This decline occurred during a period of significant geopolitical developments involving U.S.-Iran relations.

Exxon Senior Vice President Neil Chapman projected at the Bernstein conference that Brent crude cargo prices could rise to between $150 and $160 per barrel within weeks. This forecast suggests prices could surpass historical records if current market conditions persist. The projection is based on observed supply and inventory trends.

Industry executives and analysts project that Brent crude oil prices could rise to between $150 and $160 per barrel if negotiations fail and shipping through the Strait of Hormuz remains restricted. This scenario is linked to ongoing constraints in Middle Eastern oil flows and would represent a significant increase from current levels.

The future path of oil markets will depend heavily on how quickly and fully Middle Eastern oil flows recover. The speed and scale of this recovery will influence whether prices stabilize or continue to rise.

If a ceasefire agreement is reached and the Strait of Hormuz reopens within 30 days, market pressures could ease. This would help stabilize oil prices and allow for the rebuilding of inventories, improving supply conditions.

–

Source: Chevron and Exxon warn oil could hit $160 as inventories plunge