Three of the world's top oil executives are warning that the physical market is days away from a supply squeeze that could send Brent crude toward $150 per barrel. According to reports from Bernstein, ExxonMobil senior vice president Neil Chapman projected Brent could spike to $150 or $160 per barrel as markets approach rarely seen inventory levels. The warnings come as Brent crude is trading near $94 after rebounding off the lower edge of a rising channel, defying a roughly 20% drop that traders had pinned on Iran ceasefire hopes. Chapman's comments at the Bernstein Strategic Decisions Conference on May 28 put a concrete timeline on the warning, stating that inventories could hit their floor within two to three weeks as the market approaches 'unheard of' inventory levels. Latest reports from Business Standard indicate that Gulf's flagship national oil companies have issued stark timelines, with Saudi Aramco CEO Amin Nasser warning that oil market will not normalise until 2027 if Hormuz disruptions persist past mid-June 2026.
The physical backdrop explains the resilience in oil prices despite recent volatility. As reported by the IEA, global oil supply fell to 95.1 million barrels a day in April, down 12.8 million barrels a day since the conflict began in February, with Gulf output hit by the Hormuz closure running more than 14 million barrels a day below pre-war levels. Chevron CEO Mike Wirth warned that crude and product inventories are drawing down worldwide, with June and July as the critical months for inventory levels. He pointed to US distillate inventories at their lowest since 2003 and noted that some Asian markets have already seen rationing. Global observed oil inventories fell by 129 million barrels in March and another 117 million in April, according to the IEA, with about 11-12 million barrels a day of crude removed from a roughly 100-million-barrel market. Latest data shows observed global inventories were drawn down by 250 mb over March and April, equivalent to 4 mb/d, with the IEA coordinating the release of 400 million barrels across 32 member countries to partially offset losses.
The sharpest transmission mechanism has been the collapse in Asian import demand, with Chinese seaborne crude imports falling by 3.6 mb/d from February to April, according to Kpler. The aviation sector has become the most visible casualty, with jet fuel surging to approximately $195 per barrel globally from $85–90 pre-conflict levels. Major airlines have implemented significant cuts, including Norse Atlantic halting all Los Angeles flights, Virgin Atlantic scrapping London–Riyadh service, KLM cutting 80 return flights at Amsterdam Schiphol, Qantas reducing US routes while estimating an additional A$800 million on fuel bill, and Cathay Pacific pulling 2% of Asia-Pacific frequencies. Global oil demand expectations have shifted from projected growth of 730 kbd to a contraction of 420 kbd for 2026, representing a downgrade of 1.3 mb/d versus pre-war forecasts. The macroeconomic backdrop reinforces this demand compression, with China's NBS Manufacturing PMI slipping to 50.0 in May from 50.3, while the Eurozone Composite PMI fell to 47.5 in May - a 29-month low.
The market's traditional shock absorbers have been severely degraded. Transit data shows only two to five tankers per day moving through the Strait, against pre-war volumes of approximately 130-140 per day, with around 240 tankers currently idling outside the waterway. Following the UAE's formal departure from OPEC on May 1, 2026, the EIA revised OPEC's spare production capacity estimate to just 2.5 mb/d in 2027, down sharply from a pre-war estimate of 3.8 mb/d. The OPEC spare capacity backstop has been severely impaired, with the market's traditional shock absorber never being thinner. Additionally, the IEA coordinated the release of 400 million barrels across 32 member countries to partially offset losses, with global inventories expected to continue falling by an average of 4.5 mb/d through Q2 2026, keeping Brent supported at approximately trade above $100 per barrel in June.
Key technical levels will determine Brent's near-term direction. As reported by market analysts, Brent must first clear $96, then a break above $101 puts it above all key moving averages. A repeat 33% move would lift the price toward the 1.0 Fibonacci extension at $119, with the cycle high opening at $137 and $167 respectively. However, a bearish trigger remains as the 20-day EMA is closing in on the 50-day EMA, and failure to reclaim $99 keeps price boxed near the channel floor. The near-term outlook for Brent crude oil through Q3 2026 is best characterised as range-bound between $90 and $115 per barrel, with upside risk from negotiation breakdown or hurricane disruption and downside risk from accelerating demand destruction. The critical variable remains the Strait of Hormuz, which normally carries about a fifth of the world's crude, with tankers crossing only when Iran allows them to. If the standoff stretches deep into the summer driving season, the physical market will set prices at local stations rather than futures markets.
