ExxonMobil senior vice president Neil Chapman warned Thursday that global oil inventories are approaching record lows and that prices will spike sharply within weeks, according to CNBC.
Speaking at the Bernstein conference in New York, Chapman laid out a stark timeline. “We’re approaching unheard of inventory levels,” he said. “I mean really, really low levels. You can debate whether that’s going to hit, those really low levels, in two weeks or three weeks. Once you get to that point, then you’ll see price shoot up.”
Once stockpiles reach historic lows, physical Brent could climb to between $150 and $160 a barrel, Chapman said. Prices at that level would erode consumption enough to pull them back down, he said. July Brent futures settled below $94 a barrel on Thursday.
Chevron CEO Mike Wirth, also speaking at the Bernstein conference, offered a similar assessment, according to Oil & Gas Journal. “The buffers and the shock absorbers are being steadily drawn down,” Wirth said, adding that he expected the squeeze to show up in physical prices over the coming weeks, with conditions tightening further as summer gets underway.
Underlying both warnings is the ongoing closure of the Strait of Hormuz, which has removed approximately 14 million barrels per day of Middle Eastern supply from global markets. Chapman called it the most severe supply shock on record, citing IEA figures, and said that while inventories had so far absorbed the blow, they “can’t last forever.”
Earlier this month the IEA flagged that global stockpiles were being consumed at an unprecedented rate, CNBC reported. Member countries had already moved in March to put 400 million barrels of reserves into the market in an effort to ease the shortfall.
Both men cautioned that their projections were approximate, per Oil & Gas Journal. Their sense of urgency also ran ahead of the IEA’s own published outlook, which last week identified July and August as the period when market conditions would become most acute.
Futures markets have remained comparatively contained, with traders pricing in the possibility of a negotiated deal to restore shipping through the strait.
