Exxon and Chevron Brace for Rising Oil Prices Amid Strait of Hormuz Blockade

Exxon Mobil CEO Darren Woods has warned that crude oil and fuel prices are poised to climb further if the Strait of Hormuz remains blocked, signaling continued market volatility. Both Exxon and Chevron anticipate significant profit gains in the second quarter despite ongoing disruptions in their Middle Eastern operations.

The blockade has caused an unprecedented disruption of nearly 20% of global oil and LNG supply, with inventories steadily depleting. While both energy giants are increasing refinery utilization to capitalize on supply shortages, they remain cautious about expanding drilling activities amid uncertain geopolitical developments.

Unprecedented Supply Disruptions Fuel Price Surge

Darren Woods emphasized that oil prices above $100 per barrel do not yet reflect the full impact of the Strait of Hormuz blockade, which has halted almost a fifth of the world’s oil and LNG flows. Initial shipments during the early weeks of conflict temporarily masked supply shortages, but those reserves have now been exhausted, leading to daily draws on commercial and national inventories.

“If you look at the unprecedented disruption in the world’s supply of oil and natural gas, the market hasn’t seen the full impact of that yet. So there’s more to come if the strait remains closed.”—Darren Woods, Exxon Mobil CEO

Strategic Responses: Refinery Utilization Over Production Expansion

Despite White House calls to boost oil output, Exxon and Chevron are holding steady on drilling investments. Instead, they are maximizing refinery and petrochemical plant operations, even postponing maintenance, to leverage global supply shortages. Chevron CEO Mike Wirth highlighted the need for caution given the many unknowns surrounding the conflict’s trajectory.

“It’s early to have firm conclusions about how the energy system will change in the long term. I do think there will be changes, but we have to see how things play out over the coming weeks—hopefully not longer than that.”—Mike Wirth, Chevron CEO

Middle East Operations and Market Impact

Both companies face operational disruptions in the Middle East, though the region accounts for less than 5% of their global activities. Exxon’s refining and petrochemical facilities in Saudi Arabia, LNG operations in Qatar, and oil production in the UAE have been affected. With the UAE planning to exit OPEC to increase output, Exxon intends to align its strategy accordingly.

Chevron’s oil production in Saudi Arabia and Kuwait, along with petrochemical operations in Saudi Arabia and Qatar, remain disrupted. However, its natural gas production offshore Israel has resumed normal levels.

Diverging Approaches in Key Oil Basins

In the Permian Basin, Exxon is aggressively expanding production, currently exceeding 1.7 million barrels of oil equivalent per day and targeting 2.5 million by 2030. Conversely, Chevron is focusing on cost control and steady output to enhance cash flow, avoiding additional spending that could dilute this strategy.

Regarding Venezuela, Chevron remains cautious about further investments pending regulatory clarity, while Exxon is considering re-entry, leveraging its expertise with heavy crude to navigate the country’s oil landscape.

Looking Ahead: Market Uncertainties and Recovery Timelines

Woods noted that even if the Strait of Hormuz reopens, it could take months to restore normal oil and LNG flows, especially with ongoing repairs in Qatar. The potential for a lasting risk premium on prices hinges on Iran’s control over the strait and the stability of future shipments.

Both Exxon and Chevron reported strong quarterly profits despite year-over-year declines, with Exxon posting $4.18 billion and Chevron $2.21 billion. Their stock prices dipped slightly but remain near historic highs, reflecting investor confidence amid geopolitical challenges.