Exxon and Chevron Warn Oil Inventories Could Hit Record Lows Within Weeks

TLDR

• ExxonMobil senior VP Neil Chapman warned global oil inventories are weeks away from record lows
• Chapman said physical Brent crude could spike to $150–$160 a barrel once stockpiles run out
• Chevron CEO Mike Wirth said “buffers and shock absorbers” are being steadily drawn down
• The Strait of Hormuz closure has removed around 14 million barrels per day from global markets
• The IEA flagged stockpiles are being consumed at an unprecedented rate; member countries released 400 million barrels in March

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ExxonMobil senior vice president Neil Chapman issued a stark warning at the Bernstein conference in New York on Thursday. He said global oil inventories are approaching levels that have never been seen before, and that prices could spike sharply within weeks.

“We’re approaching unheard of inventory levels,” Chapman 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.”

Chapman said physical Brent crude could climb to between $150 and $160 a barrel once stockpiles reach historic lows. He added that prices at that level would likely reduce demand enough to pull them back down. July Brent futures were trading below $94 a barrel on Thursday.

Chevron CEO Echoes the Warning

Chevron CEO Mike Wirth, also speaking at the Bernstein conference, backed up Chapman’s view. “The buffers and the shock absorbers are being steadily drawn down,” Wirth said. He expected the squeeze to show up in physical prices over the coming weeks, with conditions tightening further as summer gets underway.

Both executives were careful to note their projections were approximate. But the urgency in their remarks ran ahead of even the IEA’s own published outlook.

The IEA last week identified July and August as the period when market conditions would become most acute. It also flagged earlier this month that global stockpiles are being consumed at an unprecedented rate.

The Strait of Hormuz Factor

The closure of the Strait of Hormuz sits at the center of the supply problem. Chapman called it the most severe supply shock on record, citing IEA data.

Roughly 14 million barrels per day of Middle Eastern supply have been removed from global markets as a result of the closure. Chapman acknowledged that inventories had absorbed the blow so far, but said they “can’t last forever.”

In March, IEA member countries moved to release 400 million barrels of reserves into the market to help cover the shortfall. Restocking those reserves means governments are now buyers in an already lean market.

Futures markets have remained relatively calm for now. Traders appear to be pricing in the possibility of a deal to restore shipping through the strait. But Chapman and Wirth are both signaling that the physical market tells a different story.

Crude inventories act as the market’s shock absorber. When they run low, even a small disruption can cause a sharp and sustained price move. That is the scenario both executives say is drawing closer.

The IEA has identified the next two months as the critical window.