CERAWEEK: TotalEnergies CEO warns oil, gas prices could surpass 2022 highs if Hormuz crisis holds

Global oil and gas prices could surge above the multi-year highs seen in 2022 following Russia's invasion of Ukraine if energy shipments via the Strait of Hormuz do not resume in the coming months, according to the CEO of Total Energies, Patrick Pouyanne.

With some 20% of global crude exports and LNG capacity stranded in the Persian Gulf, the situation could eclipse the severity of Europe's 2022 crisis if energy flow via the trade chokepoint remains halted, Pouyanne said on the sidelines of the CERAWeek by S&P Global conference in Houston.

"More than in 2022 for sure," Pouyanne said when asked if global oil and gas prices could exceed 2022 highs if shipping continues to avoid the strait due to the current Middle East conflict. "You could have the same type of shock, but I hope it will be solved before."

During the 2022 Russian invasion shock, Brent crude futures spiked to a 14-year high of $139/b, while Europe's Dutch TTF benchmark gas price later surged to a record high of more than Eur340 per megawatt-hour.

Brent futures slipped below $100/b on March 23, after US President Donald Trump said he had called off strikes on key Iranian power plants after "good conversations" with Iran.

Platts, part of S&P Global Energy, assessed physical Dated Brent at $110.045/b on March 23, up from $70.94/b before the current US-Israel war with Iran. Dated Brent peaked at $137.64/b in March 2022, following Russia's invasion of Ukraine.

Unlike 2022, when Europe faced a regional supply crisis, the Hormuz closure affects global energy flows simultaneously, with no spare production capacity available outside the stranded Gulf region, he said.

"It's clear to me that if this problem lasts more than three or four months, it becomes a systemic problem for the world. We cannot have 20% of the crude oil which is exported globally stranded in the [Persian] Gulf," Pouyanne said earlier, speaking to delegates at the event. The only spare oil production capacity "available on the planet was in Saudi Arabia, Abu Dhabi and Kuwait. It's stranded."

LNG crunch

The timing of the current supply crisis creates particular risks for Europe's gas supply security, with the continent emerging from winter with depleted inventories that must be refilled during August-October, Pouyanne said. That refill window also coincides with peak Asian demand for gas-fired power generation, creating competing pressures that could drive prices sharply higher if the strait remains closed.

If the Hormuz blockade continues, it could become "exactly the same problem that we had after the Russian war," where Europe had to fill a supply gap of around 50 million mt of LNG, Pouyanne said.

"Today we are out of the winter in Europe, so inventories are low... We have to refill them from August to September, October," Pouyanne said. "This is a period where Asia is using more gas because of air conditioning, so we have a critical period. Then, if there is still this blockade, we'll go back to where we were in 2022, and that's a difficulty for all customers."