HOUSTON, May 19, 2026, 17:07 CDT
- U.S. crude fell on Tuesday as traders reacted to signals that Iran talks are moving forward, though Brent closed above $111 a barrel.
- U.S. emergency oil reserve exports hit a record 9.9 million barrels last week, pushing the SPR down to roughly 374 million barrels.
- Exxon and Chevron execs say the physical oil market could still face more fallout from the Strait of Hormuz disruption.
Exxon Mobil and Chevron say oil markets aren’t factoring in the full impact from the shutdown of the Strait of Hormuz. Latest reserve and inventory numbers show governments are burning through stockpiles to keep fuel flowing.
U.S. government sent out 9.9 million barrels from the Strategic Petroleum Reserve last week, setting a record as the buffer gets smaller. The International Energy Agency said commercial inventories are running down fast, with just “several weeks” left for some reserves. Reuters
Oil pulled back Tuesday after U.S. Vice President JD Vance said the U.S. and Iran had moved forward in negotiations, but supply stayed limited. Brent crude for July finished at $111.28 a barrel. U.S. West Texas Intermediate for June ended at $107.77. Prices remain high, keeping up the squeeze on refiners, airlines, and consumers.
Strait of Hormuz, a slim shipping route at the Persian Gulf’s entrance, handled roughly a fifth of the world’s oil and LNG before the war. Even a limited closure is an issue for Gulf crude and fuel buyers.
Exxon CEO Darren Woods told analysts this month the market hasn’t yet felt the full effect of the disruption. Woods said inventory drawdowns and releases from strategic reserves have eased the early shock. But he warned prices may go up if the strait remains shut, and said it could take one to two months for shipping flows to return to normal after reopening.
Chevron CEO Mike Wirth warned of possible physical shortages at a Milken Institute panel, saying, “We will start to see physical shortages.” Wirth told the audience that “demand needs to move to meet supply,” and economies would have to slow down. Asia would feel the impact first because it relies so much on Gulf oil, then Europe, according to Wirth. Reuters
IEA said in its May oil report that global inventories dropped by 129 million barrels in March and 117 million barrels in April. The agency also said supply losses from Gulf producers had topped 1 billion barrels, with daily shut-ins over 14 million barrels.
Iraq, Saudi Arabia, Kuwait, the United Arab Emirates, Qatar and Bahrain took 10.5 million barrels a day of crude offline in April, according to the U.S. Energy Information Administration’s May report. The agency expects the Hormuz Strait will stay mostly closed through late May, with more movement in June, but crude shipments probably don’t get back to normal until later this year.
Big Oil names are seeing different impacts. Exxon, with around 20% of its oil and gas tied to the Middle East, reported a drop in output. Chevron put its Middle East exposure below 5% of total production. BP and TotalEnergies, both European, got more out of their trading desks during the recent price swings.
Big oil names are holding back on new spending. BP, Chevron, Exxon, Shell, and TotalEnergies all beat Q1 earnings forecasts, but a Reuters energy column pointed out none of them have lifted their capital plans for 2026 or later. Boardrooms are sticking with cash discipline over adding barrels fast, Reuters said.
The risk could go either way. If talks break down or there’s new fighting, shortages may get worse. But if Hormuz reopens and traders believe supply worries are fading, prices could fall fast. “A pretty significant binary outcome” is how John Kilduff of Again Capital put it—a deal or more military action. Reuters
Even if flows restart, trade probably won’t go back to normal. The EIA has Brent crude holding at about $106 a barrel in May and June, with inventories dropping, then slipping to an average of $89 in the last quarter and $79 by 2027 as more Middle East supply comes back. For now, Exxon, Chevron, and government agencies are saying roughly the same thing: the market is relying on borrowed barrels.
