Energy industry experts and analysts are cautioning about an anticipated surge in oil and gas prices due to dwindling reserves and the continued closure of the Strait of Hormuz.
The cost of Brent crude futures stood at $98.20 US per barrel on Wednesday afternoon. However, projections suggest it could skyrocket to $150 US or even surpass that mark in the upcoming weeks. This escalation is primarily attributed to diminishing expectations of a U.S.-Iran agreement to reopen the Strait and sustained demand in specific markets amid fast depleting reserves.
During a recent conference in New York, Neil Chapman, a senior vice president at ExxonMobil, highlighted the approaching unprecedented inventory levels. He emphasized the likelihood of prices spiking once reserves hit critically low levels, potentially reaching $150 US to $160 US.
Chevron CEO Mike Wirth also expressed concerns over reserve levels in an interview with Bloomberg Talks. Wirth mentioned the steady decline of inventories worldwide and hinted at a potential bottoming out in the near future.
In response to the Middle East conflict, 32 members of the International Energy Agency agreed to release 400 million barrels of oil from emergency reserves in March. The U.S. Strategic Petroleum Reserve currently stands at 357.1 million barrels as of May 29, marking a significant decrease since the conflict erupted in February 2026.
Although not labeled as a crisis, Wirth acknowledged the challenging market conditions. He underlined the formidable inertia within the system, making it arduous to navigate the current circumstances.
Efforts to reopen the Strait of Hormuz have been a focal point, with ongoing discussions between the U.S. and Iran. However, conflicting claims persist, keeping the Strait closed for most commercial shipping activities.
The prolonged conflict has led to heightened tensions, with recent missile attacks by Iran on U.S. military bases in the Gulf region further impacting oil prices. Industry experts like Al Salazar from Enverus and Heather Exner-Pirot from the Macdonald-Laurier Institute anticipate a continued rise in prices, possibly hovering at elevated levels until 2027.
The analysts warn that the reopening of the Strait remains uncertain, contingent on peace agreements and logistical considerations. The potential implications on gas prices in Canada are also highlighted, with expectations of further increases as summer demand peaks.
Despite the challenges posed by the Strait’s closure, Canada and the U.S. have managed to mitigate severe repercussions, given the oil flow’s primary destination being Asia. However, the ripple effects on global markets and inflationary pressures are closely monitored, with potential impacts on central bank policies.
The evolving situation underscores the complexity of global energy dynamics and the delicate balance between supply, demand, and geopolitical factors affecting oil and gas prices.