U.S. oil inventories are nearing critically low levels, raising concerns about a sharp increase in prices in the coming weeks. Exxon Senior Vice President Neil Chapman issued the warning at an industry conference, stating that inventories are approaching "really, really low levels." He emphasized that once these levels are reached, prices will inevitably surge.
Strait of Hormuz Disruptions
The ongoing tensions in the Strait of Hormuz, a key global oil shipping route, have exacerbated the situation. Iran’s attacks on commercial ships and U.S. efforts to guide vessels to safety have further strained the market. The U.S. has released approximately 50 million barrels from its Strategic Petroleum Reserve, reducing stockpiles to 365 million barrels, the lowest since April 2024.
"Once you get to the minimum inventory levels and all-time low inventory levels, there’s only one way to go," Chapman said.
Regional Impact
In regional hubs like Cushing, Oklahoma, inventories have dropped from 33 million barrels to 24.5 million, nearing operational lows. JPMorgan and Capital Economics predict that commercial oil inventories in developed nations could reach "operational stress levels" by early June, with critical lows likely by the end of the month.
Chevron CEO Mike Wirth echoed these concerns, noting that the market’s "shock absorbers" are nearly depleted. He expects upward price pressures to intensify in June and July as governments focus on rebuilding reserves.
While analysts initially predicted crude prices could surge to $200 a barrel after the Strait of Hormuz shutdown, massive reserve releases and temporary sanctions relief have mitigated the impact. However, industry leaders warn that policymakers must soon address inventory depletion to avoid future shocks.