While U.S. military action in Venezuela is helping Chevron’s bottom line, the U.S. actions in the Middle East are causing some problems. Speaking at the CERAWeek conference in Houston Monday, Chevron CEO Mike Wirth was very blunt about the state of oil markets.

“They’re unpredictable. They’re volatile. The market opened up last night in Asia with some anxiety. Things in the Middle East looked like they were going to escalate. The president came out with a message saying, ‘No, we’re removing this deadline that we imposed over the weekend,’ and the markets traded off. The fundamentals are very tight out there,” Wirth told Bloomberg Television.

On Tuesday, March 24, Brent crude futures inched above $103 per barrel as President Donald Trump continued his brash form of diplomacy via social media. In contrast, Iran continued to respond with threats to the Gulf States’ critical infrastructure.

Global commodity markets still seem to be swayed by the president’s obvious attempts to influence them, and Brent crude was no exception. On Monday, March 23, futures fell more than 10% after the president postponed the strikes on Iranian energy infrastructure that he had threatened over the weekend.

Trump said oil prices would “drop like a rock” once the war with Iran is over.

Meanwhile, in Venezuela, the company says it is seeing progress in Venezuelan oil production after the U.S. kidnapped the country’s president and brought him to the U.S. to stand trial, Reuters reported. President Trump has admitted that the whole operation was designed so that the U.S. could “run” the Venezuelan oil sector and redirect its production to the U.S.

While that is good for the Chevrons of the world, the Trump administration is also making their lives much more difficult with its excursions into the Middle East.

And in the meantime, oil companies and oil traders still have to fix the mess and fallout from this war.

Chevron CEO bemoans market uncertainty amid Iran war

As the war in Iran enters its fourth week, oil markets and industry leaders seem less certain than ever about when this conflict will end and just how much long-term damage has already been done.

“It will take time to rebuild inventories of the right grades of crude, the right types of products around the world to meet the demand,” Wirth said, according to SeekingAlpha.

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As for when production will get back to normal, Wirth says it is “an uncertainty that we’re going to have to deal with as we go forward. We’ve seen tightness in distillate products like diesel and jet fuel, and in particular, Asia is facing some real concerns about supply.

And while oil futures have gone haywire since the war started, Wirth says they have not fully priced in the scale of the supply disruption that was triggered by the closure of the Strait of Hormuz.

The market is instead trading on “scant information” and “perception,” while the physical supply of oil is probably tighter than the futures contracts suggest.

Oil futures have gone haywire since the Iran war started.

Photo by Jackyenjoyphotography on Getty Images

Wall Street estimates Iran war oil price increase

During the early outset of the war, the president and his cabinet made it clear that the Iran strikes were a limited military operation that could be measured in days and weeks, not months.

However, as the war enters its fourth week with no end in sight, those early estimates seem further from reality.

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While no one knows how long the current conflict will last, Saul Kavonic, head of energy research at MST Marquee, recently weighed in.

“If the status quo is maintained, where the majority of volumes from the Strait of Hormuz remain unable to flow, then prices are very low compared to the impact that will have on supply, demand of the market,” Kavonic told CNBC.

Every week this conflict continues, about 100 million barrels of crude won’t reach the market, he added. That type of change will inevitably lead to triple-digit prices.

On Monday, March 2, three days after the war started, the price of a gallon of petrol jumped 11 cents overnight, rising to $3.11 per gallon on average, per AAA, and as reported by the Associated Press.

This represents the largest one-day increase since Hurricane Katrina in 2005.

Brent crude oil hit an all-time high of $147 in 2008, rising from about $30 a barrel in 2003 to more than $100 by early 2008, reportedly spurred by increased demand from China, according to Trading Economics. But just as abruptly, Brent prices fell back down to earth, only breaking $100 per barrel again in 2022 during the Covid pandemic.

Iran’s closure of the Strait of Hormuz, through which about 20% of the world’s oil flows, is presenting a big problem for the world’s economy.

Goldman Sachs estimates that oil supply could be low for longer if production potential is further damaged in the war, but OPEC countries could alleviate that by deploying spare capacity.

“Oil prices will likely continue to trend higher while Hormuz flows remain very low,” Goldman Head of Oil Research Daan Struyven and his team said in a note reviewed by TheStreet.

“[There may be] risks to long-term prices from the Iran war beyond uncertainty around the timing of Hormuz reopening, in light of recent strikes on energy infrastructure. Oil supply could be low for longer if production potential is damaged.”

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