President Trump's deal with Iran is set to reopen the Strait of Hormuz, but how quickly it can arrest a steep decline in oil stockpiles will determine the trajectory of energy prices in the coming weeks.
For more than 15 weeks, the U.S. and other countries around the world have had to dip into oil tanks, salt caverns and strategic reserves to make up for the millions of barrels of oil trapped behind the strait.
Now, the stocks are nearing critical levels, and energy executives say without an influx of more oil, prices will have to surge to stop the run on supplies.
Mike Wirth, chief executive of Chevron, has repeatedly warned on television that the supply crunch will soon manifest itself around the world.
Neil Chapman, the No. 2 at Exxon Mobil, has said the U.S. is approaching 'unheard-of inventory levels.'
Other executives, such as Wil VanLoh, of Quantum Capital Group, say 'it's going to get ugly.'
Relief could be on the way. The U.S. and Iran agreed Sunday to a deal—set to be signed Friday in Switzerland—that would quickly reopen the strait, through which 20% of the world's petroleum typically passes.
But even if that deal holds, it would likely take months for the oil market to return to normal.
