Energy stocks rally as Chevron CEO warns oil supply tighter than futures show
Physical crude market trading at record premiums amid Iran conflict and Strait of Hormuz disruption, IEA calls largest supply disruption in history
Energy stocks climbed on Monday after Chevron chief executive Mike Wirth warned that physical oil supplies are far tighter than futures markets suggest, as the ongoing Iran conflict continues to disrupt global crude flows through the Strait of Hormuz.
Chevron shares gained 1.3% to $204.44, extending a two-week rally of roughly 10%, as the $403 billion oil major and its peers benefit from a widening disconnect between paper and physical oil markets. The broader energy sector advanced, with investors positioning for sustained price strength in what the International Energy Agency has described as the largest supply disruption in the history of the global oil market.
"The physical supply of oil is much tighter than the oil futures market suggests," Wirth said in a television interview on CNBC, adding that traders were operating with "scant information" about the true impact of the Iran conflict. "There's a risk that the Strait of Hormuz could be disrupted, and that isn't fully priced in."
The strategic waterway, through which approximately 20 million barrels per day of crude oil typically transit, has been effectively closed to commercial shipping since the conflict between Iran, the United States, and Israel began in late February. The disruption has halted roughly one-fifth of global oil and natural gas supplies, with Gulf producers forced to cut output by at least 10 million barrels per day as storage reaches capacity, according to the IEA's March oil market report.
This physical scarcity has driven Dubai-linked crude to approximately $138-$140 per barrel—representing a $37-$40 premium over futures contracts for immediate delivery—even as paper markets have retreated. Benchmark Brent crude futures fell to $106.25 on Monday, while West Texas Intermediate dropped to $92.85, after President Donald Trump extended his deadline for Iran, according to BNN Bloomberg.
The divergence between physical and paper markets has created steep backwardation in futures, with April WTI trading near $99 per barrel but declining to the mid-$70s by late 2026. This structure indicates markets perceive current high prices as temporary, even as physical buyers scramble to secure actual barrels.
The Brent-WTI spread has widened to $10-$20 per barrel, significantly above the historical norm of $3-$5, signaling that US domestic supply cannot easily replace disrupted Middle Eastern barrels, as noted by energy analysts.
Major integrated oil companies including Chevron, ConocoPhillips and Occidental Petroleum are positioned as both beneficiaries of elevated prices and potential victims of demand destruction if oil prices remain above $100 per barrel for an extended period. The IEA member countries unanimously agreed on March 11 to release 400 million barrels from emergency reserves to address the disruptions.
Chevron currently trades at 30 times trailing earnings, with a dividend yield of 3.4%. Analysts have an average target price of $193.75, according to market data, suggesting limited upside from current levels even as production outages support near-term cash flows.