Exxon and Chevron Warn in Unison: Oil Prices Could Soar to $150

Chevron CEO Mike Wirth stated on Thursday at the Bernstein Investor Conference that as the Iran war continues to block the Strait of Hormuz, the crude oil inventory buffer is being "steadily depleted," and the market's ability to absorb supply and demand imbalances has significantly decreased. He anticipates that price pressures will transmit more directly to the physical market in the coming weeks, with greater upward pressure in June and July.

Exxon Senior Vice President Neil Chapman's language was even more severe. At the same event, he said that commercial crude oil inventories, gasoline, diesel, and jet fuel have all declined significantly. The release of strategic petroleum reserves has temporarily alleviated the impact, but this buffer is disappearing. "We are approaching inventory levels that are unprecedented, really very, very low," said Chapman. Once this critical point is reached, the Brent crude oil price model indicates it will surge directly to 150 to 160 dollars, after which demand destruction will bring the market back into balance.

The relative stability of today's oil prices is itself a paradox. The blockade of the Strait of Hormuz has resulted in about 12 to 13 million barrels of crude oil per day not circulating normally, yet oil prices have fallen by about 10% over the past week, mainly because the market continues to bet on a ceasefire agreement between the US and Iran. However, Abu Dhabi National Oil Company CEO Sultan Al Jaber made it clear last week that even if the conflict ends, it will take at least four months for the Strait of Hormuz to return to 80% of its pre-conflict flow, with a full recovery not expected until the first or second quarter of 2027 at the earliest.

JPMorgan Chase's previous calculations showed that if the blockade of the Strait of Hormuz continues, OECD commercial inventories could fall to operational stress levels in June and reach a global operational baseline in September. Data from Goldman Sachs shows that the daily net reduction in global crude oil inventories in May has set a historical record of 8.7 million barrels.

Wirth also warned that the cost of repairing war damage to Middle Eastern oil and gas infrastructure will be as high as tens of billions of dollars, which will bring additional upward pressure on oil prices. He also admitted that if oil prices remain high, economic recession bringing decreased demand may serve as a hedge, but this scenario is also not optimistic.