Oil executives are warning the Trump administration that oil prices will likely surge in the next weeks as inventories continue to decrease with the Strait of Hormuz closed.
Politico detailed that the warnings came as data showed that fuel makers were largely relying on oil and fuel from storage tanks to replace products no longer arriving.
One industry executive told the outlet that inventories are at "dangerously low levels" and that they have "shared those concerns at the highest levels of government about what's coming in mid-to-late June." "You're hitting tank bottom."
A White House official, however, rejected such scenarios have taken place. "Politico's anonymous sources are wrong," the official said.
Regardless, public warnings abound. Strategists who spoke to The Washington Post noted that even if the key waterway is quickly reopened, U.S. consumers will still face high fuel prices due to low inventories.
"These shock absorbers have been surprisingly effective," said Jim Burkhard, global head of crude oil research at S&P Global Energy.
Exxon Senior Vice President Neil Chapman said last week that "we're approaching unheard-of inventory levels" and once that happens "you'll see prices shoot up." Brent crude oil, the international benchmark, could soar to $150 or $160 in such a scenario, he added. "You can see the trajectory of these inventories in the data, and it is concerning."
"You can debate whether that's going to hit those really low levels in two weeks or three weeks. Once you get to that point, then you'll see prices shoot up," he added.
Jeff Currie, Carlyle's chief strategy officer of energy pathways and co-chairman of Abaxx Markets, told CNBC in late May that Asia is close to the "minimum operating levels" as part of the reserves can't be used immediately.
"I would say, Asia, you're there. Europe, give it about another month, and look for July being a problem in the U.S.," he added.
"All of the inventories that are drawing out of the United States out of the U.S. SPR [Strategic Petroleum Reserve] are being exported into Europe, so the Europeans think they have no problem because they're getting all of this oil being imported from the United States, but that can't continue on," he added.
The comments echo those of IEA chief Fatih Birol, who also said in late May that oil markets could enter a "red zone" in the summer as reserves continue to decrease.
