Oil executives warn Hormuz price spikes

ExxonMobil CEO Darren Woods said on May 1 that oil markets had not yet absorbed the full impact of the Strait of Hormuz disruption because inventories, strategic reserves and barrels already in transit were still cushioning the shock. The warning resurfaced in market commentary on X on May 22 as banks and energy watchers pointed to falling stockpiles, freight strain and the approach of the U.S. summer driving season. The core argument was simple: if the waterway stays constrained, the market loses its buffer and prices have to do the balancing. ### Why are executives and banks focused on inventories? The International Energy Agency said in its May 2026 oil market report that global observed oil inventories fell by 129 million barrels in March and another 117 million barrels in April. The agency said continued disruption to seaborne trade through Hormuz was depleting global inventories “at a record pace,” while on-land stocks dropped 170 million barrels in April. (cnbc.com) UBS said inventories were just above 8 billion barrels at the end of February and had fallen to 7.8 billion barrels by the end of April. The bank said stockpiles could approach 7.6 billion barrels by the end of May if demand held steady, according to CNBC’s account of the note. JPMorgan’s commodities team said the system can seize up before oil physically runs out because much of global inventory is needed to keep pipelines and tanks operating. (iea.org) Natasha Kaneva, JPMorgan’s head of global commodities strategy, compared the issue to circulation, saying the network fails when working volume gets too low. (cnbc.com) ### What did Darren Woods actually say? Darren Woods told investors on ExxonMobil’s first-quarter earnings call that commercial inventories would eventually fall to levels where they could no longer serve as a supply source. He said prices would continue to rise if the strait remained closed. CNBC, citing the call, reported Woods said the market had been buffered by strategic reserve releases, commercial inventory draws and tankers already loaded before the disruption deepened. (cnbc.com) The IEA gave the same mechanism in more formal terms on May 13. It said higher prices and a weaker economic environment would increasingly affect fuel use, and it projected global supply would decline by 3.9 million barrels per day on average in 2026 even assuming flows through the strait gradually resumed from June. ### Where do freight and insurance costs enter the picture? (cnbc.com) Bloomberg reported on March 17 that the cost of war-risk coverage for ships crossing Hormuz had climbed to about 5% of a vessel’s value, roughly five times the level seen in the earliest days of the Iran war. For a $100 million tanker, that implied about $5 million in insurance cost, according to people involved in the market cited in the report. (iea.org) Reuters reported on May 20 that three supertankers carrying 6 million barrels of Middle East crude were crossing the strait after waiting in the Gulf for more than two months. The report said sailings were still small and uncertainty remained over conditions in the Gulf, underscoring that even some successful transits do not restore normal traffic immediately. (insurancejournal.com) ### Why mention summer driving season now? Fatih Birol, the IEA’s executive director, said on May 18 that commercial oil inventories were depleting rapidly and only a few weeks’ worth were left, while strategic reserve releases were “not endless.” Reuters reported that Birol linked the warning to rising seasonal demand as the Northern Hemisphere moved toward summer. (msn.com) The timing matters because gasoline demand usually rises as U.S. road travel increases. That is why market participants on X tied the inventory draw to sharper price moves in May and June rather than treating the disruption as a distant shipping story. That framing is consistent with the IEA’s warning of future price spikes ahead if buffers keep shrinking. (pgjonline.com) ### How does Colombia fit into the story? Yahoo Finance reported on May 23 that Colombia’s natural gas output was down 15% from a year earlier and reserves were at a 20-year low, leaving the country more exposed as Hormuz disruption threatened LNG supply. That made Colombia a downstream example of how a Gulf chokepoint can hit countries beyond the main oil exporters. (cnbc.com) The next checkpoints are the IEA’s June assumptions on whether Hormuz flows resume and the tanker-movement data published by shipping trackers such as LSEG and Kpler. Those two measures will show whether the market is rebuilding buffers or continuing to burn through them. (iea.org) (finance.yahoo.com)