The Looming "Inventory Shock" in the Oil Market: The Reality of the $150 Era Warned by Exxon

A quiet tension is spreading in the oil market.

Executives from the American oil giant Exxon Mobil have issued an unusually strong warning about global oil inventories. They suggest that disruptions caused by the Middle East conflict and the closure of the Strait of Hormuz could lead to inventories dropping to "really, really low levels" in the coming weeks.

The reason this statement is drawing attention is not simply because an oil company executive is predicting a price increase. It is because the current oil futures market does not seem to be fully accounting for the scale of the crisis.

According to CNBC, Neil Chapman, Senior Vice President of Exxon Mobil, stated at a conference hosted by Bernstein in New York that oil inventories are approaching "levels unheard of." While he mentioned that the timing of reaching these low levels could be debated—whether in two weeks, three weeks, or three to four weeks—he warned that once these levels are reached, "prices will soar."

Chapman's assessment suggests that if inventories approach historically low levels, the spot price of Brent crude could rise to $150-$160 per barrel. This represents a significant increase from current market prices.

Interestingly, the current Brent crude futures are below $100. According to the CNBC article, July Brent crude futures ended trading on Thursday at less than $94 per barrel. The market is hopeful about progress in negotiations between the U.S. and Iran, which could lead to the reopening of the Strait of Hormuz. In other words, investors are betting on a scenario where "the crisis will soon be resolved."

However, Exxon's warning stands in contrast to this. Even if diplomatic negotiations progress, the already lost supply, disrupted logistics, and reduced inventories will not be immediately restored. While the market is looking at the "possibility of an agreement," the oil industry is focused on the "physical reduction of inventories."

This difference is significant.

In the oil market, while prices move based on news and expectations, actual supply is constrained by real-world infrastructure such as ships, ports, pipelines, refineries, and stockpiles. When a critical point like the Strait of Hormuz is closed, it is not just a matter of some ships taking a detour. The entire flow of oil from the Middle East to Asia and Europe is clogged, and alternative routes have their limits.

The International Energy Agency (IEA) explains that as of 2025, about 20 million barrels per day of oil and petroleum products pass through the Strait of Hormuz, accounting for about 25% of the world's seaborne oil trade. If such a significant flow is halted, the only option is to deplete global inventories to fill the gap.

According to the CNBC article, the IEA estimates that over 1 billion barrels of supply have already been lost from the market due to the current turmoil. While the release of national reserves has somewhat curbed price increases, Chapman points out that "this cannot continue indefinitely."

In March, IEA member countries agreed to release 400 million barrels of oil reserves, the largest ever, as an emergency measure to calm market panic. However, reserves are essentially insurance to be used in times of crisis and not a permanent source of supply. Continued releases will naturally deplete the reserves themselves.

Reuters reported in mid-May, based on IEA analysis, that observable global oil inventories decreased by a total of 246 million barrels in March and April. This is a record pace and indicates that the crisis is shifting from a mere temporary price fluctuation to an issue of actual demand and inventory.

What is crucial here is that rising oil prices are not the only concern.

Oil is not only a raw material for gasoline and diesel but also affects aviation fuel, marine fuel, chemical products, plastics, fertilizers, logistics costs, and food prices. If oil rises to the $150 range, consumers will feel the impact not only at gas stations but also in supermarkets, delivery costs, airfares, daily necessities, and agricultural costs.

Chapman stated that when prices rise to a certain level, "demand destruction" occurs, and the market moves back towards equilibrium. Demand destruction refers to the phenomenon where consumers and businesses reduce purchases because prices are too high. For households, this could mean reducing car travel, postponing trips, or cutting back on heating and cooling. For businesses, it could lead to reduced transportation volumes, production adjustments, price increases, or even postponing investments.

In other words, if oil prices spike, demand will eventually drop, putting a brake on price increases. However, this adjustment comes as a result of economic pain. Rather than prices naturally settling down, it means that consumers and businesses can no longer bear the costs and cut back on demand to achieve balance.

There are various reactions to this news on social media.

When CNBC posted the article on X, many responses were gathered, with prominent concerns about rising energy prices. In the U.S., in particular, gasoline prices are directly linked to the cost of living, leading to concerns such as "Are fuel prices going up again?" and "This will hit the summer travel season." On Threads and LinkedIn, energy market participants and investment accounts also highlighted Exxon's executive's timeline of "2-3 weeks" and price forecast of "$150-$160."

On the other hand, there are also skeptical reactions. On X, some posts perceive Exxon's and CNBC's reports as "overly alarmist." There is an opinion that when oil majors warn of price increases, it should be carefully considered whether it is a supply-demand analysis or a statement intended to influence market sentiment.

There is some reason for this skepticism. In the oil market, whenever geopolitical risks rise, predictions of price spikes emerge, but it is not uncommon for prices to fall afterward due to diplomatic negotiations, increased production forecasts, or demand slowdown. In fact, the current futures market remaining below $100 suggests that investors are not yet seeing the "worst-case scenario" as the base case.

However, the characteristic of this situation is that the inventory issue is more prominent than the price issue.

Market prices fluctuate based on expectations, but inventories actually decrease. Even if short-term prices are curbed by releasing reserves, if inventories approach the bottom, buyers will have no choice but to prioritize securing physical supplies. While futures prices remain relatively calm, the physical market could see tightening supply-demand conditions.

Reuters reports that the U.S. shale industry also has limits to its responsiveness. The inventory of drilled but uncompleted wells, known as DUCs, is at a record low, making it difficult for U.S. producers to significantly increase supply in a short period. Even if demand for U.S. crude rises amid disruptions in Middle Eastern supply, it may not be possible to add sufficient quantities immediately.

This indicates a different phase from the shale revolution of the 2010s. At that time, when oil prices rose, U.S. shale companies could relatively quickly ramp up production, playing a role in curbing price increases. However, now, the capacity of drilled and completed wells is limited, and there are issues with labor costs, equipment costs, and capital discipline. Investors are demanding profitability and shareholder returns from oil companies rather than unlimited production increases.

Moreover, even if the Strait of Hormuz were to reopen, the problem would not be resolved immediately. It would take time to normalize logistics, including shipping schedules, insurance premiums, port processing, cargo redistribution, and refinery crude procurement. Chevron CEO Mike Wirth also reportedly stated that the flow after reopening the strait could "progress slowly, with stops and starts."

Therefore, the points investors and consumers should focus on are not just whether the U.S. and Iran reach an agreement. More importantly, how quickly actual supply returns after an agreement and at what pace depleted inventories are replenished.

Replenishing inventories can also be a factor that drives up prices. If reserves are released during a crisis, they need to be repurchased afterward. According to Capital Economics, as reported by the Wall Street Journal, replenishing reserves after a crisis could create additional demand of 950 million to 1.2 billion barrels. While this demand may not emerge all at once in the short term, it could tighten the oil market over several years.

In other words, this crisis is not as simple as "the strait opens and it's over." It could leave a long-lasting impact on the energy market through multiple stages, including supply shocks, inventory depletion, reserve releases, logistical disruptions, and replenishment demand.

So, what does this issue mean for Japan?

Japan relies heavily on imports for most of its oil, with a high dependency on the Middle East. Disruptions in the Strait of Hormuz could have a more direct impact on the Japanese economy than on the U.S. If oil prices rise, it will ripple through gasoline, electricity bills, logistics costs, food prices, and airfares. If combined with a weak yen, the increase in import costs will be even greater.

For companies, rising energy prices squeeze profit margins. Industries such as manufacturing, transportation, aviation, chemical, agriculture, and food service are particularly vulnerable. Companies that can pass on costs are better off, but those that cannot raise prices amid strong consumer frugality will have to absorb the increased costs themselves.

On the other hand, for energy-related companies or those with resource interests, rising prices could boost earnings. Among investors, there is likely to be a focus on energy stocks and resource-related stocks in anticipation of rising oil prices. However, if price increases lead to demand destruction, it could be negative for the overall economy and weigh on the stock market as a whole.

The divided reactions on social media also reflect that this issue is not simply about whether "high oil prices are good or bad." For energy companies, it is an opportunity for revenue, and for oil-producing countries, it leads to increased fiscal revenue. On the other hand, for consumer countries and households, it is inflationary pressure, and for companies, it is a cost increase. For investors, they must consider both the short-term rise in energy stocks and the long-term risk of economic downturn.

The statements by Exxon's executives should not be dismissed as mere fearmongering. At the very least, the fact that oil market experts are showing strong caution towards the most fundamental indicator, "inventories," is significant.

The fact that oil prices remain below $100 does not mean the crisis has passed. Rather, the market is oscillating between expectations for diplomatic negotiations and the worsening of physical supply-demand conditions. If inventories truly approach their lowest levels, prices could suddenly spike, defying the optimism of the futures market.

There are three main focal points moving forward.

First, whether the reopening of the Strait of Hormuz is realized. Second, how quickly actual oil transportation normalizes if it is reopened. Third, at what stage the global inventory decline is fully reflected in prices.

Rising gasoline prices and electricity bills will be the most visible signals for consumers. However, behind the scenes, the world's oil inventories, an unseen safety valve, are rapidly thinning.

If Exxon's warning is correct, the coming weeks will be a critical juncture for the oil market. Will the diplomatic resolution the market hopes for arrive in time, or will the inventory limits come first?

The answer will significantly influence not only the energy market but also the global economy and household burdens.

Source URL at the end of the text

CNBC: Reference source for statements by Exxon Mobil executive Neil Chapman on declining oil inventories and soaring crude prices, Brent crude prices, closure of the Strait of Hormuz, and IEA's supply disruption.
https://www.cnbc.com/2026/05/28/oil-inventory-exxon-strait-hormuz-iran-war.html

IEA: Official information on the agreement by IEA member countries in March 2026 to release 400 million barrels of emergency reserves in response to supply disruptions caused by the Middle East conflict, and the volume of oil passing through the Strait of Hormuz.
https://www.iea.org/news/iea-member-countries-to-carry-out-largest-ever-oil-stock-release-amid-market-disruptions-from-middle-east-conflict

IEA Oil Market Report March 2026: IEA's monthly oil market report. Background information on emergency reserve releases, global inventories, and supply disruptions.
https://www.iea.org/reports/oil-market-report-march-2026

Reuters: Report on IEA's indication that observable global oil inventories decreased at a record pace in March and April, the release of 400 million barrels of reserves, and the status of releases as of May.
https://www.reuters.com/business/energy/iea-chief-birol-commercial-oil-inventories-depleting-rapidly-only-weeks-left-2026-05-18/

Reuters: Report on the decline in the inventory of drilled but uncompleted wells (DUCs) in the U.S. shale industry, limiting the potential for rapid production increases.
https://www.reuters.com/business/energy/record-low-us-shale-well-backlog-curbs-fast-output-gains-amid-export-surge-2026-05-29/

CNBC official X post: Reference to check reactions on social media to the original article.
https://x.com/CNBC/status/2060108105266954416

Barchart official Threads post: Example of Exxon's warning being shared on investment and market-related accounts on social media.
https://www.threads.com/@barchartofficial/post/DY7Jhxtmwg_/exxon-mobil-warns-oil-inventories-will-hit-dangerously-low-levels-in-the-coming/

LinkedIn post: Example of energy and investment stakeholders sharing Exxon's executive statement and focusing on the $150-$160 oil price outlook.
https://www.linkedin.com/posts/prandelligiacomo_exxons-just-said-oil-inventories-will-activity-7465893527080677376-mz-l

X post: Example of skeptical reactions to Exxon's and CNBC's reports.
https://x.com/ExSenatorMike/status/2060360770420875483