Exxon Mobil warns global oil stocks may hit critical lows within weeks
Neil Chapman warns oil prices would surge once global crude stockpiles fall to unprecedented lows in the coming weeks, adding pressure to energy markets.
- An Exxon Mobil senior vice-president warns that global crude oil inventories are approaching unprecedented lows, a level that could be reached within weeks.
- The company predicts that once these critical inventory lows are hit, oil prices will rise sharply, with Dated Brent potentially reaching US$150 to US$160 a barrel.
- The historic drop in stockpiles is attributed to the largest oil supply disruption in history, caused by Iran's closure of the Strait of Hormuz.
- Despite a record release of 400 million barrels from IEA reserves, existing stockpiles are falling at a record pace and cannot indefinitely cushion the market from the supply shock.
Exxon Mobil has warned that global crude oil inventories are set to fall to their lowest level on record in the next few weeks, a situation that would force oil prices sharply higher and put pressure on energy markets.
“We are approaching oil inventory levels that have never been this low before,” Neil Chapman, senior vice-president of Exxon, said at a conference hosted by Bernstein in New York.
Chapman warned with concern: “I mean very, very low levels, extremely low. You can debate whether levels that critical will be reached in 2 or 3 weeks, but whenever we get there, you will see oil prices shoot up immediately.”
The executive added that Dated Brent prices in the physical market would jump to US$150 to US$160 a barrel when oil stockpiles fall to record lows in the coming weeks.
He said that once prices rise to a certain level, demand destruction would help pull the market mechanism back into balance.
Iran’s decision to close the Strait of Hormuz has had a huge impact on the oil market, with more than 1 billion barrels of oil supply already lost.
That marks the largest oil supply disruption in history, according to the International Energy Agency (IEA).
Chapman said oil stockpiles had helped cushion some of the impact, but could not sustain the situation indefinitely.
Earlier in the same month, the IEA had already warned that oil inventories were falling at a record-breaking pace.
The agency’s member countries agreed in March to release a record 400 million barrels from reserves to ease the shock from the oil supply disruption.
Oil industry executives had already been warning for 2 consecutive months that the current crude oil futures market still did not reflect the scale and severity of the impact from the oil supply disruption.
