Energy industry experts and analysts are cautioning about a probable significant surge in oil and gas prices due to depleting 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 afternoon. However, industry specialists anticipate a potential increase to $150 US or higher in the upcoming weeks. This escalation is attributed to diminishing prospects for a U.S.-Iran agreement to reopen the Strait, alongside steady demand in certain markets as reserves dwindle rapidly.
During a conference in New York last week, Neil Chapman, a senior vice president at ExxonMobil, highlighted the looming crisis, mentioning, “We’re nearing unprecedented inventory levels.” Chapman suggested that prices could soar to the range of $150 US to $160 US within the specified timeframe.
Chevron CEO Mike Wirth echoed similar concerns in an interview with Bloomberg Talks, emphasizing the declining reserve levels. Wirth indicated, “We are steadily drawing inventories down on products, on crude, in locations around the world,” hinting at a potential bottoming out of inventories in the near future.
Responding to the Middle East conflict, 32 members of the International Energy Agency sanctioned the release of 400 million barrels of oil from emergency reserves in March. The U.S. Strategic Petroleum Reserve currently stands at 357.1 million barrels of oil as of May 29, marking a significant decline since the war erupted in February 2026. The reserve is nearing its lowest levels since December 2023, reflecting a concerning trend reminiscent of the early 1980s.
Al Salazar, head of macro oil and gas research at Enverus, described the situation as “mind-numbing” and “frustrating” as oil prices fail to mirror the existing circumstances. Salazar concurred with the assessments of Exxon and Chevron executives, suggesting that current prices are artificially low and should be higher.
Heather Exner-Pirot, energy director at the Macdonald-Laurier Institute, acknowledged the role of strategic oil reserves in managing the crisis thus far but warned about their limitations. Exner-Pirot projected a realistic expectation of oil prices reaching $150 US in the near term as inventories near depletion.
Industry analysts anticipate continued high prices at least until 2027 due to the challenges in reopening the Strait of Hormuz. The uncertainty surrounding the resumption of normal flows through the Strait poses a significant hurdle, with concerns about the reliability of announcements regarding its reopening.
Despite the surge in gas prices, demand remains robust in Canada, with consumers showing resilience to high prices. The upcoming summer months, typically characterized by peak gasoline demand, could witness further price hikes, potentially exceeding $2 a liter in Canada if oil prices stabilize at $120 US to $140 US per barrel.
Canada and the U.S. have managed to mitigate the severe impacts of the Strait’s closure, primarily affecting oil shipments to Asia. However, the repercussions of heightened oil prices are likely to ripple through various sectors and economies, potentially leading to increased inflation and prompting central banks to consider interest rate adjustments.
In conclusion, the prevailing market conditions and geopolitical tensions indicate a challenging road ahead for the energy sector, with potential ramifications on global oil and gas prices in the foreseeable future.
