Energy industry experts and analysts are cautioning that oil and gas prices are poised to surge due to dwindling reserves and the continued closure of the Strait of Hormuz.
The price of Brent crude futures stood at $98.20 US per barrel on Wednesday, with projections indicating a potential spike to $150 US or higher in the coming weeks. This anticipated increase is primarily attributed to diminishing prospects for a U.S.-Iran agreement to reopen the Strait, coupled with sustained demand in certain markets amidst rapidly depleting reserves.
Neil Chapman, a senior vice-president at ExxonMobil, raised concerns about the escalating inventory levels during a recent conference in New York. He suggested that once inventory hits critical lows, prices are likely to skyrocket, potentially reaching $150 US to $160 US.
Chevron CEO Mike Wirth echoed these sentiments in an interview with Bloomberg Talks last week, expressing worries about declining reserve levels and emphasizing the critical nature of the situation in the upcoming months.
In response to the Middle East conflict, 32 International Energy Agency members agreed in March to release 400 million barrels of oil from emergency reserves. However, the U.S. Strategic Petroleum Reserve currently stands at 357.1 million barrels as of May 29, marking a significant decrease since the war commenced in February 2026. This decline, nearing levels from the early 1980s, underscores the challenging position of the market.
Despite the ongoing speculation about a potential U.S.-Iran deal to reopen the Strait of Hormuz, recent events, including Iran’s missile attacks on U.S. military bases in the Gulf region, have exacerbated tensions and led to a rise in oil prices.
Analysts and industry insiders predict that oil prices are likely to remain elevated until at least 2027, with uncertainties surrounding the reopening of the Strait contributing to the prolonged price surge. The current market dynamics indicate a precarious situation, with little trust in swift resolution of the conflict.
Additionally, there are concerns about the impact of rising oil prices on gas prices in Canada, especially with the approaching summer peak demand period. Should oil prices hover around $120 US to $140 US per barrel, it is anticipated that gas prices in Canada could exceed $2 per litre, potentially becoming the new norm for consumers in the upcoming months.
The closure of the Strait of Hormuz has not only affected oil prices but has also prompted adjustments in work schedules in some Asian countries, underscoring the widespread ramifications of the crisis. As oil prices continue to climb, the economy faces challenges, including potential inflationary pressures and the need for central banks to consider raising interest rates.
In conclusion, the prevailing uncertainty surrounding the conflict in the Middle East and its impact on global oil markets underscores the need for a swift resolution to mitigate the adverse effects on energy prices and the broader economy.
