Chevron’s CEO Says The Oil Buffers Are Gone

Chevron Chairman and CEO Mike Wirth delivered a blunt message in Austin on Friday: the shock absorbers that kept oil from exploding earlier in the Iran war are finished. Strategic stockpile releases and the U.S. decision to loosen rules on sanctioned crude sitting in floating storage have been “played out.” From here, he said, it is hard to see prices ease quickly. The risks over the next few months sit to the upside.

That warning landed in the same week U.S. retail diesel crossed $6 a gallon for the first time, Brent pushed back through $100, and Asia’s product hub in Singapore printed multi-week highs in gasoil and bunker fuel. It also landed as China, after months of sitting on inventories, returned as a buyer — and as Saudi Arabia’s last workable seaborne route to Asia through the Bab el-Mandeb Strait continued to seize up.

Wirth is playing two clocks at once. Near term, he is telling the market there is almost no inventory left to hide behind. Longer term, Chevron is funding a $7 billion Venezuelan expansion from cash already generated inside the country, aiming to more than double output to about 600,000 barrels per day by 2031.

What Wirth actually said

Speaking at a University of Texas at Austin energy conference, Wirth walked through the arithmetic that has defined 2026. The war began in late February. Hormuz, which normally moved about a fifth of global oil, effectively shut. Prices jumped, but not as far as a 20-percent supply shock would imply, because three cushions absorbed the blow: commercial inventories that started the year above normal, government reserve releases, and barrels that had been parked on the water under sanctions until Washington relaxed those restrictions.

Those cushions are gone. “It’s harder to envision a scenario where prices soften and quickly,” Wirth said. “I think the risks remain to the upside over the next few months.”

He has been circling this point for months. In May he warned that physical shortages were starting. In mid-summer he said the buffers and shock absorbers were being drawn down week by week. Friday’s version was shorter and colder: the buffers are played out. U.S. average diesel at $6 a gallon is the household version of that sentence. Brent was on track for its best week in nearly four months.

Wirth also noted that Chevron is seeing fewer disruptions at the giant Tengiz field in Kazakhstan after the Trump administration spoke with Ukraine about strikes on Russian energy infrastructure in the Black Sea region. The company is not waiting on a clean Middle East reopening to add barrels. It is leaning on Venezuela instead.

Bab el-Mandeb: Saudi Arabia’s Plan B is now the problem

When Hormuz closed, Riyadh executed the textbook workaround. Crude that used to leave Ras Tanura and other Gulf terminals was shoved west on the East-West pipeline to Yanbu on the Red Sea. At the peak, Yanbu was exporting more than 4 million barrels a day of crude, plus 400,000 to 500,000 barrels a day of refined products from Red Sea refineries. Most of the Asia-bound crude — on the order of 3.0 to 3.4 million barrels a day — had to exit south through the Bab el-Mandeb Strait.

That strait is now the binding constraint.

Yemen’s Houthis declared a maritime embargo on Saudi-linked shipping on July 20 and then started hitting tankers. In the past 48 hours, they have tightened the noose further, capturing the port city of Mocha and, according to Yemeni government sources, the strategic island of Perim in the middle of the channel. CNN reported Friday that the waterway that became Saudi Arabia’s escape hatch after Hormuz shut is looking “increasingly shaky.” Saudi crude flows through Bab el-Mandeb “collapsed” to about 400,000 barrels a day in August and are now even lower.

The New York Times reported this week that Saudi oil exports have fallen to a 13-year low. Official production dropped 1.9 million barrels a day in August to 6.238 million barrels a day, with crude exports around 3.2 million barrels a day. There is no clean substitute for the southern exit. Cargoes headed to Europe or the United States can go north through the Suez Canal. Asia cargoes cannot, not without adding weeks. The SUMED pipeline can move crude from the Red Sea to the Mediterranean. Refined products cannot use SUMED. They need product tankers through Suez, then a long haul around Africa if the destination is China, India, Japan, or Korea. Freight, insurance, and time all jump.

Refined products are the sharper problem. Vitol CEO Russell Hardy told the Asia Pacific Petroleum Conference in Singapore that the market is missing about 2 million barrels a day of products from Russia, after Ukrainian strikes on refineries, and almost another 2 million barrels a day from the Middle East. Saudi Arabia’s 400,000-barrel-a-day Jazan refinery has been knocked offline by Houthi attacks. A prolonged Bab el-Mandeb disruption does not just delay Saudi crude. It delays diesel, jet, and fuel oil that Asia actually burns.

Kpler’s own explainer is blunt: holding Yanbu exports near 4.2 million barrels a day with the same destinations exposes about 3.4 million barrels a day of Asian crude to the southern chokepoint, plus the product stream. Moving oil north is “credible.” Running that workaround at full scale, with the tanker fleet, SUMED, and Suez all having to expand at once, is not.

China just started buying again. That changes the math.

China was the hidden reason prices did not go to the moon in the spring. After the war started, Beijing slashed seaborne purchases, tapped commercial and strategic stocks, cut product exports for a stretch, and let refiners run lower. June imports fell to a decade-low near 7.1 million barrels a day. Analysts at Columbia and S&P said that pullback is a large reason the world avoided a “doomsday” price spike even with Hormuz shut.

That pause is ending.

Official customs data show August imports at 37.93 million tons, or about 8.93 to 8.96 million barrels a day — up 6.2 percent from July and almost 30 percent from the June trough, though still more than 23 percent below August 2025. Kpler’s preliminary tracking for September arrivals is about 7.2 million barrels a day, which would hold August’s recovery rather than extend it. Energy Aspects founder Amrita Sen is more aggressive: she told Bloomberg that China is estimated to import about 10 million barrels a day this month, roughly 3 million barrels a day more than June. Shanghai crude futures have traded as high as $121 as local buying flipped the Brent-Shanghai spread from a deep discount to a premium.

What that means is simple. The one large buyer that chose not to compete for scarce seaborne barrels is competing again. Chinese refiners restocked while prices were still in the $80s. Those cargoes are arriving now, into a market where Saudi Asia barrels are late or missing and product balances are already short. Sen told CNBC on Friday the oil market has reached an “inflection point” and is heading into an “upward spiral” between crude and products. She said 120 million barrels were drawn from global inventories in the past two weeks alone.

CIBC’s Rebecca Babin made the same point on CNBC: China is picking up crude purchases again. Energy Intelligence reported from APPEC in Singapore that Chinese buyers “came to the spot market and spooked the market a bit,” lifting Russian Urals and ESPO as well as Iraqi and West African grades.

If Wirth is right that the inventory buffer is gone, China’s return is the demand-side confirmation. The world no longer has both a large unused Chinese stockpile and unused commercial tanks in the OECD. It has one or the other, and lately it has neither.

Singapore product prices: the physical market is already talking

Singapore is where Asia prices diesel, jet, gasoline, and bunker fuel. That is why “oil from Singapore hit new highs” matters more than a single futures print in London or New York.NYMEX Singapore Gasoil Platts futures jumped to $179.21 on September 10, up 5.5 percent on the day and well above the $156 area at the end of August. The 52-week range on that contract runs from $77.68 to $232.57; this week’s move is the latest leg higher, not a one-off spike. Spot-style Singapore assessments this week showed gasoline 92 near $131 a barrel, jet/kerosene around $162, and gasoil 0.5 percent sulfur near $169 to $171. Bunker prices in the port told the same story: VLSFO around $877 a tonne on September 11 and LSMGO above $1,335.

Onshore product inventories in Singapore actually rose to a two-month high of 40.47 million barrels in the week ending September 9, with light and middle distillates both building. That is not a glut signal so much as a routing signal: barrels are landing in the hub while net diesel/gasoil exports swing wildly week to week and gasoline exports look softer on margin concerns. The price is still rising because replacement supply from the Red Sea and from Russian product exports is unreliable.

Retail pumps in Singapore remain elevated. Diesel has been running near S$3.50 to S$4.00 a liter depending on the brand and the week, far above pre-war levels. The island imports almost all of its energy. When Platts Singapore gasoil rips, freight, power tariffs, and pump prices eventually follow.

What the X thread said

Commodity trader Jack Prandelli summarized Wirth’s remarks in a post that framed the week in two timelines: depleted buffers and upside price risk now; a decade-long bet on Venezuelan barrels later. “Wirth is playing both timelines at once,” he wrote.

The comment thread was short and pointed.

Beyond-Charting wrote: “Yet somehow Bessent says he doesn’t understand why oil prices remain elevated.”Slippy asked: “Did he clear this statement with Axios?”The joke writes itself. The physical market — $6 diesel, Singapore gasoil at $179, Shanghai crude at $121, Saudi exports at a 13-year low — does not need a press strategy. It needs barrels.

Chevron in Venezuela: the long-cycle answer

Last week Chevron signed new contract terms with Venezuela to expand into two additional Orinoco Belt areas and more than double joint-venture output to about 600,000 barrels a day by 2031. The investment is more than $7 billion. CFO Eimear Bonner said this week the company will more than double the rig count. Current JV output is roughly 280,000 to 290,000 barrels a day, already up 15 percent this year, and those barrels already move to U.S. Gulf Coast refineries built for heavy crude. Total costs are expected to stay under $20 a barrel. New terms include international arbitration rights.

Wirth was explicit on Friday: Chevron will fund the entire program from cash the existing ventures generate. No outside capital. “We’ll live entirely within the means of those ventures’ ability to generate cash, not bring in cash from the outside.”

That is not a 2026 fix for Bab el-Mandeb. It is an admission that Middle East spare capacity and inventory buffers cannot be assumed. Venezuela still produces only about 1.25 million barrels a day against reserves that are the world’s largest. Energy Secretary Chris Wright has talked about national output reaching 2 million barrels a day by the end of the decade. Chevron’s 600,000 barrels a day would be a large share of that, but it is a 2031 number, not a fourth-quarter number. RBC has noted current Chevron production near 280,000 barrels a day, up from 50,000 a few years ago. The ramp is real. It is not fast enough to refill the buffers Wirth just declared empty.

What analysts are saying about prices

The Street has stopped treating $70 oil as the base case.EIA (September STEO): Global inventories are down about 400 million barrels so far in 2026. Brent averaged $91 in August. EIA now sees Brent around $90 in the second half of 2026 and $91 for the full year, easing to $74 in 2027 as production recovers and stocks rebuild. Distillate cracks and retail diesel were revised higher.

• HSBC: Raised 2026 Brent to $90 from $80 and 2027 to $85 from $65. Longer-term assumption moved to $75 from 2028. Stalemate case: inventories draw toward operational lows and Brent near $120, easing only after demand destruction and non-OPEC supply catch up in the third quarter of 2027.
• Goldman Sachs: December Brent $85, 2027 average $80, with a path above $120 if Gulf output stays 4 million barrels a day below pre-war levels into 2027. The firm now assumes Middle East shipping disruptions continue into 2027.
• Bank of America: Baseline $83 in the second half of 2026 and $75 next year if flows “gradually normalize.” If skirmishes that curb oil flows continue into year-end, $95 to $120.
• UBS: Year-end Brent $95 and March 2027 $90, both raised this week after inventories at sea fell by 150 million barrels over two months and Chinese imports recovered.
• S&P Global Energy: A disrupted “new normal,” Dated Brent averaging around $90 or higher for the rest of 2026 and $86 in 2027, broadly an $80–$100 range through 2027. Middle East crude and condensate exports seen at 10 to 16 million barrels a day through 2027 versus about 20 million before the war.
• Mirae Asset Sharekhan: Brent could test $120, with a 2026 average around $92.
• Energy Aspects / Amrita Sen: Inflection point. Trajectory higher. Upward spiral between crude and products. China back as a large buyer. Asia feels the product pinch into year-end.

Wirth did not put a number on Friday. He did not need to. The people who do put numbers on it are clustering in the $90s as a base and $120 as the case if Hormuz stays impaired and Bab el-Mandeb stays dangerous.

The through-line

The oil market spent the first half of this war living off stored barrels, sanctioned barrels that Washington let move, and a Chinese buyer that chose to eat its own pantry. Wirth’s point is that those three choices are no longer available in size.

Saudi Arabia can still move some crude north through SUMED and Suez. It cannot move a full Asia-facing export program that way without weeks of delay, a shortage of hulls, and a product bottleneck that SUMED cannot fix. China is no longer the buyer that stays home. Singapore’s gasoil and bunker complex is already pricing scarcity, even when local tanks tick higher for a week. Chevron is putting $7 billion into Venezuela because that is the barrel it can control, not because that barrel arrives in time to refill Cushing or Fujairah this winter.

Buffers are a mass-balance concept. Wirth is a chemical engineer. He said the quiet part: what went into the tanks has now come out. After that, price does the rationing.

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