At the Bernstein annual strategic decision-making conference in New York, Neil Chapman, senior vice president of ExxonMobil, issued a blunt warning to the market: "We are approaching unprecedented inventory levels. Inventories are really as low as they can possibly be." He stated bluntly that if inventories continue to bottom out, models predict that Brent crude futures prices "will surge to $150 or even $160 per barrel." Despite the unprecedented supply disruptions caused by the Hormuz crisis, crude oil prices have been surprisingly suppressed. Brent crude futures fell back to $93 per barrel on Thursday as rumors circulated that the US and Iran were about to reach an extension of the ceasefire agreement. However, the concern is that if oil shipments from the Middle East do not resume quickly, prices could fluctuate wildly and surge to new highs at any time. Neil Chapman explained that normally, if there were such a large-scale supply disruption, oil prices "would have already gone up in the air." The current situation is being maintained primarily due to three factors that have temporarily eased tensions: Saudi Arabia's exports via the East-West pipeline, the initial release of sanctioned crude oil from Iran, Venezuela, and Russia, and a significant reduction in oil inventories.
Neil Chapman emphasized, "Commercial inventories of crude oil and refined products (such as gasoline, diesel, and jet fuel) have been significantly depleted. It is this depletion of inventories, coupled with the release of strategic petroleum reserves by most Western countries, that has temporarily offset or compensated for the shock of supply losses." "The reason crude oil prices have remained between $90 and $100 for the past six weeks is entirely because inventory depletion has temporarily buffered the supply shock. But this situation cannot last forever." Neil Chapman warned that global commercial inventories are declining at an alarming rate and could reach a critical point at any time. He believes that once inventories reach extremely low levels, Brent crude oil prices will surge to $150 or even $160 per barrel. "When prices rise to a certain level, demand will be destroyed, and the market will return to equilibrium because prices will become unaffordable." Even in the best-case scenario, Neil Chapman predicts that oil prices will remain high. "Assuming the Strait of Hormuz reopens tomorrow, oil prices won't immediately soar to $150, but the global market will need a considerable amount of time to rebalance," Neil Chapman pointed out. He noted that there is currently a severe mismatch between global supply and demand. It will take at least four to six weeks for the supply chain to return to normal. Following this, if people become anxious about a resurgence of the crisis, they will rush to buy, leading to even stronger demand than before the crisis, thus further pushing up prices. He believes that logically, a wave of "supplementary demand" will inevitably follow, and coupled with the supply shortages of the past period, oil prices are destined to remain high.
