ExxonMobil warns of potential oil price spike amid low inventories

Neil Chapman, senior vice president of ExxonMobil, warned during an investors conference that global oil markets may soon experience a sharp price increase due to declining inventories, which he described as reaching "unheard of" levels. He highlighted that ongoing geopolitical disruptions, including issues related to the Strait of Hormuz, are exacerbating the situation.

Chapman emphasized that the market is losing approximately 11 to 12 million barrels a day from the global supply of around 100 million barrels daily. He noted that while current price shocks are being mitigated by oil inventories and strategic reserves, these buffers may not hold much longer. "We’re approaching unheard of inventory levels. Once you get to that point, then you’ll see prices shoot up," he stated.

He further explained that models indicate Brent crude prices could surge to between $150 and $160 per barrel if inventories continue to decline. Currently, Brent futures for July delivery were trading under $94 per barrel as investors await any potential negotiations between the U.S. and Iran that could affect the Strait's operational status.

Chapman highlighted the broader implications of rising crude prices, noting that they impact essential goods such as fertilizers and plastics, and could also increase delivery and trucking costs. He remarked, "Crude oil goes into virtually everything around us." He added that predicting the exact timing of any price hikes is challenging and expressed that even if the Strait of Hormuz were to reopen, it would take time for the market to rebalance.