Oil prices have surged to their highest level since 2022, with Brent crude jumping over 6% to trade above $118 per barrel and WTI crude leaping nearly 7% to around $107 per barrel. At one point, Brent traded at $119.76 per barrel, marking the highest level since 2022, while some other oil grades are trading near record levels of $150 per barrel. The prolonged closure of the Strait of Hormuz continues to drain global oil stockpiles, with the war with Iran impacting more than 12 million barrels per day of oil supply, representing about 12% of total global demand. According to the U.S. Energy Information Administration, U.S. oil exports hit a record 6.4 million barrels per day last week, up 1.6 million barrels per day from the prior week, with most barrels coming from storage as U.S. crude inventories drew down by 6.2 million barrels to 459.5 million barrels.
Analysts are expressing optimism about crude oil production prospects for 2027, despite current supply constraints. According to research agency BMI, a unit of Fitch Solutions, prospects for growth in 2027 have become more bullish due to three key factors. The first reason involves favourable base effects from 2026, with growing cumulative supply losses currently above 600 million barrels for crude, potentially rising comfortably above one billion barrels should the conflict extend to June. However, recent market developments show that major oil companies are not signaling plans to increase production significantly to bring down prices at the pump. As reported by BMI, oil prices could remain elevated through the end of this year, with the world needing to restock inventories that could rebuild above pre-war levels to increase preparedness for another supply shock.
The second factor centers on restocking requirements that will enable a full unwinding of the OPEC-plus production cut deal over H2 2026 and 2027. As reported by BMI, this includes both the 1.65 million barrels per day (mbd) and 2.2 million mbd tranches of cuts. The third factor involves the UAE's exit from the OPEC group, allowing it to bring more of its targeted 5 mbd capacity into play over the coming years. Unless there's a rapid reopening of the Strait of Hormuz and a quick restart of shut-in production across the Persian Gulf, oil prices could remain high into 2027.
Despite unprecedented oil price volatility above $100 per barrel, major US oil companies are maintaining their cautious production approach. Chevron CEO Mike Wirth summed up the company's plans as 'Steady as she goes,' emphasizing that it's early into the conflict to make big changes. ExxonMobil is increasing production at the same rate previously planned, while ConocoPhillips is only 'slightly' boosting production in the Permian Basin. Occidental Petroleum CEO Vicki Hollub noted that the company 'executed as we planned' in the first quarter, with the company focusing on 'long-term value created by companies that execute consistently across cycles.' Several oil companies have positioned themselves to capitalize on higher oil prices by focusing on becoming more profitable at lower prices, including ExxonMobil and Devon Energy, making them among the best oil stocks to buy given the likelihood that oil prices will remain high for the rest of this year.
According to the American Petroleum Institute (API), crude oil inventories fell by 8.1 million barrels over the last week, with gasoline and distillate stocks declining by 6.1 million barrels and 4.6 million barrels respectively. As reported by ING Think, some 13 mbd of crude oil supply has been disrupted, though this has been offset by inventories that are declining rapidly. BMI noted that available stocks are being rapidly depleted, with a spillover of the conflict into summer months potentially pushing inventories towards or below operational tolerances. The prolonged closure of the Strait of Hormuz has pushed crude oil prices to their highest level since 2022, with oil prices likely to remain elevated through the end of this year as the world needs to restock inventories.
For 2027, BMI forecasts an average of $72.5 per barrel for Dated Brent and $72 per barrel for Brent futures, should the conflict extend into June. The research agency noted that physical supply shortages will increasingly destroy demand in smaller energy markets, requiring demand destruction to spread to larger consumers and significant price adjustments. However, recent market data shows that higher oil prices are creating substantial revenue opportunities for major companies, with ExxonMobil and Chevron both reporting significantly higher earnings than the same quarter last year, with Exxon saying it made $8.8 billion when factoring in accounting adjustments. The companies are actually making much more money on actual oil sales, with the prolonged closure of the Strait of Hormuz pushing crude oil prices to their highest level since 2022, enabling oil companies to make substantial profits this year.
