Oil Prices Could Spike to $150-$160 as Inventories Drain, May 31

Oil prices have cooled to $90 per barrel on hopes of a U.S.-Iran peace deal, but executives at XOM and CVX warned prices could spike to $150-$160 in the coming weeks. The Strait of Hormuz closure has caused the biggest oil supply disruption on record, forcing the world to burn through 8.7 million barrels per day from global stockpiles. With inventory buffers shrinking fast, the market’s ability to absorb the supply shock is fading.

Why Oil Inventories Are Collapsing

The Strait of Hormuz closure has cut Persian Gulf oil production by more than 50%. This forced the global economy to tap into emergency reserves, including the U.S. Strategic Petroleum Reserve (SPR). Goldman Sachs estimates the world is burning through a record 8.7 million barrels per day from global stockpiles. The total supply loss since the war began exceeds 1 billion barrels.

The Buffer Is Running Out

U.S. commercial crude inventories ended last week at 441.7 million barrels, about 2% below their five-year average. The SPR has fallen to 365.1 million barrels, down from 415.4 million barrels before the war began. Chevron CEO Mike Wirth warned that “the buffers and the shock absorbers are being steadily drawn down.” ExxonMobil Senior Vice President Neil Chapman stated the world is “approaching unheard of inventory levels.”

What This Means for Oil Stocks

Chapman warned that Brent crude could reach $150 to $160 per barrel once inventories hit critically low levels, which could happen within two to three weeks. Brent is currently up 50% on the year despite the recent pullback from $110. With Meyka rating XOM at B+ and CVX at B+, both stocks are positioned to benefit from higher oil prices. XOM trades at $145.33, down 1.1% on the day, while CVX is at $182.46, down 0.3%.

The Peace Deal Wildcard

Current oil prices reflect optimism that the U.S. and Iran are close to reopening the Strait of Hormuz. If a deal materializes, supply could flow again and ease pressure on inventories. If negotiations fail, the market has almost no cushion left to absorb the supply shock, making a sharp price spike likely. The next two to three weeks will determine whether oil stabilizes or surges.

Final Thoughts

Oil executives are signaling a major price spike is coming within weeks as global inventories near critically low levels. For energy investors, XOM and CVX offer exposure to higher crude prices, though both stocks trade at elevated valuations with P/E ratios above 24.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.