Energy Industry Update

Oil prices experienced one of the most volatile trading weeks of 2026 during the period of May 3 through May 7, as traders reacted to the ongoing U.S.-Iran conflict, disruptions in the Strait of Hormuz, and sudden changes in diplomatic negotiations . June West Texas Intermediate crude futures swung violently between a high of $107.46 and a low of $88.66 before stabilizing near $97 a barrel by the end of the week , according to OilPrice.com. By Thursday's close, international benchmark Brent crude futures fell about 1% to close at $100.06 a barrel, while U.S. West Texas Intermediate futures ticked 0.28% lower to settle at $94.81 per barrel , CNBC reported. According to market data, WTI traded at $71.50 per barrel on Friday, up 0.6%, while Brent stood at $75.20, up 0.5%.

The wild price swings reflected the market's sensitivity to diplomatic developments. U.S. crude oil plunged by as much as 15%, to $88 per barrel, and international Brent crude oil fell as much as 11%, to $96 per barrel on Wednesday after NBC News reported the U.S. believed it was nearing a deal to end the war with Iran. U.S. officials told Axios on Wednesday that the U.S. and Iran were close to a one-page, 14-point memorandum of understanding that would end the war and establish a framework for further negotiations, with the deal lifting restrictions in the Strait of Hormuz , according to CNBC.

But optimism proved short-lived. Oil was down about 5% earlier in the session on hopes that the U.S. and Iran would strike a deal, but prices turned higher after a senior Iranian official appeared to rebuff the U.S. proposal , CNBC reported Thursday.

UAE Abandons OPEC in Historic Break

In a move that could fundamentally reshape global oil markets, the United Arab Emirates announced its withdrawal from OPEC and the wider OPEC+ framework on Tuesday, with the Gulf country, which has a capacity of approximately 4.8 million barrels per day and significant room to increase output, announcing it would quit the organisation to focus on "national interests" , Al Jazeera reported.

The UAE's withdrawal became effective on May 1, marking the exit of a member that had contributed to the organisation since 1967 , according to Al Jazeera. The UAE was the third-largest producer in OPEC behind Saudi Arabia and Iraq , CNBC noted.

The timing was striking. Abu Dhabi's departure is not a reaction to a single grievance but the convergence of three forces: the Iran war, a deepening rivalry with Saudi Arabia, and a strategic realignment with Washington that has been years in the making , Foreign Policy reported. The Emirati energy minister confirmed on Tuesday that Abu Dhabi did not even consult Riyadh before announcing its departure, a detail that says everything about the state of the relationship, with Riyadh, OPEC's unquestioned leader, learning of the exit from a press release , according to Foreign Policy.

The Abu Dhabi National Oil Company has spent a decade building toward 5 million barrels per day, a target now pulled forward to 2027, and under OPEC+ quotas, actual UAE output ran roughly 30 percent below capacity in the period before the war , The Diplomat reported. UAE wants to supply more oil than its OPEC quota and that could help push down prices once the Strait of Hormuz opens , Al Jazeera noted, with experts saying the United States government will welcome the move for its potential to curb the oil-producing cartel's pricing power.

Physical Shortages Loom as Inventories Drain

Behind the diplomatic theater and cartel politics, a more urgent crisis is building. Signs of physical shortages in crude oil are emerging, Chevron chief executive Mike Wirth warned this week, noting that "we will start to see physical shortages" , according to OilPrice.com citing Reuters.

Wirth said surplus supply in commercial markets, tankers in so-called shadow fleets avoiding sanctions, and national strategic reserves were all being absorbed, with commercial stockpiles, shadow fleet capacity, and strategic reserves all being drawn down simultaneously—a combination that will now start showing up in real shortages rather than just elevated prices , TheStreet reported.

Global observed oil inventories fell by 85 million barrels in March, with stocks outside of the Middle East Gulf drawn down by a significant 205 million barrels as flows through the Strait of Hormuz were choked off, while floating storage of crude and oil products in the Middle East rose by 100 million barrels and onshore crude stocks in the region were up by 20 million barrels , according to the International Energy Agency's April report.

The Financial Times warned that low stocks of crude and products in Europe are bigger risks for the continent than price alone. Reserves released by the IEA are already being used domestically at a pace of around 2.5 million barrels per day, so it will take about 160 days , Homayoun Falakshahi, senior energy analyst at Kpler, told Euronews.

Cheniere Sees LNG Demand Surge Despite Derivative Losses

The Iran war's impact on energy markets extended to liquefied natural gas, where Cheniere Energy said on Thursday that Middle East supply disruptions were tightening global LNG markets and increasing competition for flexible U.S. cargoes, even as the company reported a steep quarterly net loss driven by non-cash derivative charges, with shares slumping 5.5% after the company reported a $3.5 billion net loss for the first quarter, hurt by $4.8 billion of unfavorable variance related to changes in the value of derivative agreements linked to long-term LNG contracts , according to U.S. News citing Reuters.

Despite the accounting hit, the company's commercial outlook brightened. Chief Commercial Officer Anatol Feygin said the company is "astounded" that global gas prices have not risen higher with the closure of the Strait of Hormuz disrupting 100 cargoes a month, noting prices could rise further in 2026 as Europe tries to fill its storage capacity heading into winter and as Asia feels the effects of the physical loss of LNG cargoes from the Middle East , U.S. News reported.

Cheniere raised its 2026 adjusted core profit forecast to between $7.25 billion and $7.75 billion—from its earlier range of $6.75 billion to $7.25 billion—on higher LNG production forecasts and stronger market margins , according to U.S. News. Natural Gas Intel reported that Cheniere's management team expects the Iran war to again boost contracting for American LNG as more buyers search for reliable supplies to fill a gap left by damaged infrastructure in the Middle East .

According to market data, Henry Hub natural gas traded at $3.25 per MMBtu on Friday, down 2.4%.

Mexico Bets Big on Natural Gas Infrastructure

As global energy markets convulse, Mexico is doubling down on natural gas infrastructure to support its growing power sector. Mexico is planning to invest 140 billion pesos ($8.1 billion) in new gas pipelines over the next four years, the latest step in President Claudia Sheinbaum's plan to boost the country's power generation , Bloomberg reported Thursday.

State utility Comision Federal de Electricidad and pipeline network operator Cenagas will contribute, with CFE building nine new pipelines while Cenagas will construct three, and will also invest in repair and maintenance of existing infrastructure , Energy Minister Luz Elena Gonzalez said, according to Bloomberg.

Natural Gas Intel reported that the Mexican government's newly unveiled natural gas pipeline plan through 2030 outlines around $7.8 billion in both new and maintenance projects to fortify the electric grid , with 13 power plants nearing startup .

The expansion comes as Mexico's dependence on U.S. gas deepens. Mexico's reliance on U.S. natural gas is set to deepen in 2026, with analysts predicting growth in pipeline imports to historic levels as robust demand outpaces lagging domestic production and new infrastructure comes online , Natural Gas Intel reported in January.

The energy crisis triggered by the Iran war has exposed vulnerabilities across global supply chains—from crude oil and refined products to specialized lubricants and jet fuel. As diplomatic efforts continue, the clock is ticking on commercial inventories that have cushioned the blow. Whether peace comes in time to prevent the physical shortages Chevron's CEO warned about may determine whether this energy shock becomes a full-blown crisis.