Politico reports:

The oil industry is warning the Trump administration that a Hormuz-sized hole in the world’s petroleum market is steadily draining inventories to levels that are likely to send global energy prices surging in the next several weeks, according to four executives.

Industry executives have flagged the issue to senior White House officials and Cabinet members in recent weeks as part of the Trump administration’s ongoing dialogue with the U.S. energy industry, the people said. The warnings came as recently as late last month as data from the U.S. Energy Information Administration and other sources began showing that fuel makers were increasingly relying on oil and fuel from their storage tanks to replace products no longer arriving from the Middle East.

“We’re at dangerously low levels already,” said one industry executive who was granted anonymity to discuss private conversations with the administration. “We have shared those concerns at the highest levels of government about what’s coming in mid-to-late June. … I hope they are paying attention to inventories right now. You’re hitting tank bottom.”

Iran has effectively closed the Strait of Hormuz since the U.S. and Israel launched military strikes three months ago, kicking off what has become the biggest disruption in crude oil flows ever. Countries are drawing down supplies in their oil and fuel storage tanks to make up for the shortage of supply coming from the Middle East, but inventories are now running dangerously low and some companies and market analysts are sounding the alarm that a price spike could come later this month.

Some of the conversations have been general warnings while others have focused on tight inventories of specific fuel types in particular locations, such as jet fuel on the West Coast, a second person involved in the conversations said.

A White House official denied that any senior members of staff have been warned privately by the industry about inventories. “Politico’s anonymous sources are wrong,” the official said.

An Energy Department official said that while the agency remains in regular dialogue with energy industry leaders, there have been “no such discussions” about inventories.

Executives from Exxon Mobil, Chevron and other oil companies are also raising the alarm publicly, warning last week that fuel prices are poised to jump if inventory levels continue their rapid decline. The U.S. average gasoline price was $4.26 a gallon Wednesday, according to AAA, $1.28 a gallon higher than before the war started, off the levels near $4.50 reached a few weeks ago.

Neil Chapman, Exxon’s senior vice president, told an investor conference last week that dated Brent — the benchmark for physical crude oil prices — could hit $150 or $160 a barrel soon in that scenario.

“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,” Chapman said. [Continue reading…]