White House insists oil execs' ominous new warning never happened: report

Senior oil industry executives have privately warned Trump administration officials that global fuel inventories are draining at an alarming rate following the effective closure of the Strait of Hormuz, but the White House denies those high-level talks.

Four industry executives told Politico that insiders have delivered warnings in recent weeks to senior White House officials and Cabinet members that a significant price spike could arrive as soon as mid-to-late June, and data from the U.S. Energy Information Administration shows companies are increasingly drawing on storage reserves to compensate for the near-total halt in crude oil flows from the Middle East.

"We're at dangerously low levels already," one industry executive said. "You're hitting tank bottom."

Iran has effectively closed the Strait of Hormuz since the United States and Israel launched military strikes three months ago, triggering what analysts describe as the largest disruption to global crude oil flows on record, and U.S. crude stocks fell by 8 million barrels last week — the eighth consecutive weekly decline — and now sit 3 percent below their five-year average.

Gasoline stocks are 5 percent below that benchmark, with diesel and jet fuel each running 3 percent under, and total U.S. commercial petroleum inventories have fallen by 52 million barrels since the war began. Globally, inventories have declined by approximately 500 million barrels, dropping at a rate of roughly 5.8 million barrels per day.

"I've never seen inventory numbers fall so much so quickly," said Jim Burkhard of S&P Global Energy. "It is stunning."

Exxon Mobil senior vice president Neil Chapman told an investor conference last week that benchmark crude prices could reach $150 to $160 a barrel if inventory levels continue their decline. The national average gasoline price stood at $4.26 a gallon Wednesday, according to AAA — $1.28 higher than before the conflict began.

The White House disputed insider accounts of private warnings, with a spokesperson stating that Politico's anonymous sources were "wrong" and that the administration "does not have a supply problem." Officials pointed to record domestic oil production, Strategic Petroleum Reserve releases and new supply arrangements as protective measures for American consumers.

Worldwide stocks are currently holding around 7.5 billion barrels — down about 500 million barrels since the start of the war – but most of that oil has already been sold and isn't being held in reserve, and one expert told the Council on Foreign Relations this week that drained storage tanks are an “iceberg under the water.”

“You may not see immediately on the horizon the actual economic challenges that will be coming, because you look at the flat price and you say, ‘OK, we can muddle through this and Iran will come to terms eventually,’” Helima Croft, global head of commodity strategy at RBC Capital Markets, told the council Wednesday. “But if we get in a situation where we have this strait effectively closed, or the strait status quo, and we’re sitting in September or October, then you’re going to be looking at industrial shortages.”