Exxon warns oil inventories will hit dangerously low levels due to Iran war

Exxon Mobil has issued a stark warning that global oil inventories are plummeting toward record low levels. Senior Vice President Neil Chapman stated that the industry is approaching “unheard of” inventory levels that could trigger significant price volatility.

The Risk of Price Spikes

Speaking at a Bernstein conference in New York, Chapman warned that inventories may hit all-time lows within the next two to four weeks. Once these minimum levels are reached, he indicated that prices are likely to “shoot up.”

According to the executive, the price of physical Brent oil cargoes could spike to between $150 and $160 per barrel. This surge may continue until “demand destruction” occurs, which would eventually bring the market back into balance.

Did You Know? Iran’s closure of the Strait of Hormuz has resulted in the largest oil supply disruption in history, costing the market more than a billion barrels.

Market Disruption and Mitigation

The current crisis is driven by the war in the Middle East and the closure of the Strait of Hormuz. While oil stockpiles have mitigated the impact thus far, Chapman noted that this buffer “can’t last forever.”

The International Energy Agency (IEA) previously warned that inventories are being depleted at a record pace. In response, IEA members agreed in March to release a record 400 million barrels to lessen the impact of the supply disruption.

Expert Insight: Samantha Carter suggests that the current gap between Brent futures—which closed under $94—and the projected $150+ physical price reflects a market that may not yet be pricing in the full scale of the Middle East disruption.

Looking Ahead

Current Brent futures for July delivery remain under $94 per barrel. This pricing reflects investor hope that a settlement between the U.S. And Iran could potentially reopen the Strait of Hormuz.

GPCA TV – Neil Chapman Interview

However, industry executives have suggested for two months that the futures market may not reflect the actual scale of the disruption. If inventories hit their minimum levels, the market may have only one direction to go.

Frequently Asked Questions

What is the predicted price for Brent oil if inventories hit all-time lows?
Exxon Mobil executive Neil Chapman stated that physical Brent oil cargoes could spike to $150 to $160 per barrel.

What has caused the current oil supply disruption?
The disruption was triggered by the war in the Middle East and Iran’s closure of the Strait of Hormuz, which cost the market over a billion barrels.

How has the International Energy Agency (IEA) attempted to stabilize the market?
In March, IEA members agreed to release a record 400 million barrels of oil to mitigate the impact of the supply disruptions.

How do you think potential spikes in energy costs will impact global business operations in the coming month?