Darren Woods, Chairman and CEO, Exxon Mobil.

Katie Kramer | CNBC

U.S. oil surged to the highest level since 2008 on Thursday, and Exxon CEO Darren Woods said prices could be heading much higher.

“If there is a significant supply disruption with respect to Russian crude … that will be very difficult for the market to make up and therefore that will lead to, I think, significantly higher prices,” he told CNBC’s “Squawk on the Street.”

Oil prices surged above $100 per barrel last week as Russia invaded Ukraine, prompting supply fears in what was an already very tight market ahead of the invasion. Prices have kept climbing as the fighting intensifies.

West Texas Intermediate crude futures, the U.S. oil benchmark, hit $116.57 per barrel on Thursday, the highest level since September 2008. International benchmark Brent crude rose to $119.84, a price last seen in May 2012.

So far, the sanctions imposed by the U.S. and its allies have not targeted Russia’s energy complex directly, but the ripple effects are being felt. International buyers are shunning Russian oil to avoid potentially violating the financial sanctions.

Additionally, companies, including Exxon, are pulling Russian operations.

The oil giant announced Tuesday evening that it was halting operations in the country and would make no further investments. The announcement came after BP and Shell said they would divest from their assets in Russia.

“Our business engages significantly with the government, the host governments where we operate. We felt like the decisions that were being made by the Russian government with respect to its incursion in Ukraine were inconsistent with our philosophies and how we run our business,” Woods told CNBC.

He said Russia’s invasion was a “tipping point” in terms of working with the country, but left open the possibility of re-entering it at a later date.

“We’ll keep an open mind,” he said, before adding that “things would have to change pretty significantly, frankly.”

Prior to Russia’s invasion, oil prices were at multiyear highs. Demand has bounced back since the depths of the pandemic, and producers have kept supply in check. OPEC and its allies, which includes Russia, met Wednesday and said they would keep output steady. In April, they will raise production by 400,000 barrels per day, sticking with a previously agreed schedule.

Producers in the U.S. also have kept supply in check. As energy companies emerge from the pandemic, shareholders are demanding stricter capital discipline with an emphasis on capital return in the form of dividends and buybacks. So while in prior years prices above $100 would have led to an uptick in drilling, it hasn’t happened this time around.

Still, Woods said Exxon is “maximizing production” and expanding its operations in the Permian Basin.

He added that the market signals are working, which should ultimately bring more production online across the industry.

“That price response that we’re seeing is the outcome of a tight supply-demand balance. Marginal sources of supply …come into the marketplace and so I think you’ll see that price draw more resources,” Woods said.

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