U.S. oil surged to the very best stage since 2008 on Thursday, and Exxon CEO Darren Woods mentioned prices could possibly be heading a lot higher.
“If there is a significant supply disruption with respect to Russian crude … that will be very difficult for the market to make up and therefore that will lead to, I think, significantly higher prices,” he informed CNBC’s “Squawk on the Street.”
Oil prices surged above $100 per barrel final week as Russia invaded Ukraine, prompting provide fears in what was an already very tight market forward of the invasion. Prices have stored climbing because the preventing intensifies.
West Texas Intermediate crude futures, the U.S. oil benchmark, hit $116.57 per barrel on Thursday, the very best stage since September 2008. Worldwide benchmark Brent crude rose to $119.84, a worth final seen in Might 2012.
Thus far, the sanctions imposed by the U.S. and its allies haven’t focused Russia’s power complicated immediately, however the ripple results are being felt. Worldwide consumers are shunning Russian oil to keep away from doubtlessly violating the monetary sanctions.
Moreover, corporations, together with Exxon, are pulling Russian operations.
The oil large announced Tuesday evening that it was halting operations within the nation and would make no additional investments. The announcement got here after BP and Shell mentioned they would divest from their property in Russia.
“Our business engages significantly with the government, the host governments where we operate. We felt like the decisions that were being made by the Russian government with respect to its incursion in Ukraine were inconsistent with our philosophies and how we run our business,” Woods informed CNBC.
He mentioned Russia’s invasion was a “tipping point” when it comes to working with the nation, however left open the potential for re-entering it at a later date.
“We’ll keep an open mind,” he mentioned, earlier than including that “things would have to change pretty significantly, frankly.”
Previous to Russia’s invasion, oil prices had been at multiyear highs. Demand has bounced again for the reason that depths of the pandemic, and producers have stored provide in test. OPEC and its allies, which incorporates Russia, met Wednesday and mentioned they would maintain output regular. In April, they may increase manufacturing by 400,000 barrels per day, sticking with a beforehand agreed schedule.
Producers within the U.S. even have stored provide in test. As power corporations emerge from the pandemic, shareholders are demanding stricter capital self-discipline with an emphasis on capital return within the type of dividends and buybacks. So whereas in prior years prices above $100 would have led to an uptick in drilling, it hasn’t occurred this time round.
Nonetheless, Woods mentioned Exxon is “maximizing production” and increasing its operations within the Permian Basin.
He added that the market alerts are working, which ought to in the end carry extra manufacturing on-line throughout the business.
“That price response that we’re seeing is the outcome of a tight supply-demand balance. Marginal sources of supply …come into the marketplace and so I think you’ll see that price draw more resources,” Woods mentioned.