Chevron chief executive Mike Wirth has warned that disruptions in the global oil market are unlikely to be short-lived, while inventories continue to decline. According to The Wall Street Journal, that view differs from the Donald Trump administration’s assessment, which has described the market disruptions as “temporary.”
Commercial petroleum inventories around the world have been falling for more than half a year. Strategic crude oil reserves are also close to depletion, leaving the market more exposed to fresh shocks.
Analysts estimate that last week’s attacks, which forced Saudi Arabia to halt operations on a key pipeline bypassing the Strait of Hormuz, removed at least 2.5 million barrels a day from the market. The loss comes on top of an already undersupplied market.
Wirth said it is difficult to predict the next move in prices, but a rapid decline appears hard to imagine under current conditions. “I would like to say that I see some reasons for de-escalation, but at this point it is hard to believe that will happen,” he said.
Energy advisers are also warning that if the war with Iran does not move closer to an end, the situation could spiral out of control. In the United States, diesel prices have climbed to a record $6.23 a gallon, while gasoline, which had fallen below $4 earlier this summer, has risen again to $4.32.
Against that backdrop, investors are increasingly asking analysts when consumers squeezed by high prices will begin cutting fuel use, a shift that could affect demand and the market’s next balance point.
