Chevron (CVX) CEO Mike Wirth is warning that investors are being too complacent about crude oil prices and that the market has not fully accounted for the supply disruptions caused by the closure of the Strait of Hormuz near Iran.
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Wirth told a crowd at S&P Global’s (SPGI) energy conference in Houston, Texas that crude supplies are tighter than futures contracts currently indicate, and that more oil shocks are likely on the way that markets are not pricing in right now.
“There are very real, physical manifestations of the closure of the Strait of Hormuz that are working their way around the world and through the system that I don’t think are fully priced into the futures curves on oil,” Wirth said at the conference.
Crude Oil Prices Tumble
Wirth’s comments come on a day when crude oil prices have fallen more than 10% after U.S. President Donald Trump announced negotiations between America and Iran and said he will halt attacks on the oil-rich Middle Eastern nation for at least five days.
Brent crude oil, the international standard, is down 12% in afternoon trading on March 23 at $98.95 a barrel. West Texas Intermediate (WTI) crude oil, the U.S. standard, is down 11% and trading at $87.73 U.S. per barrel.
Despite the sharp price declines, Wirth said the market is trading on “scant information” and that future surprises are likely in store for markets and investors. “There really is a difference in terms of physical supply this time versus prior incidents,” he said.
Is CVX Stock a Buy?
Chevron’s stock has a consensus Strong Buy rating among 21 Wall Street analysts. That rating is based on 16 Buy and five Hold recommendations issued in the last three months. The average CVX price target of $197.25 implies 3.36% downside from current levels.
