Oil Crisis Warning — Here's What Happens Next

[00:02] situation. Now, I want to be very clear about this. Nobody knows exactly where oil prices are headed next week or next month. But you know what? I'll tell you organizations raising concerns independently at the same time, then

[00:18] So, today I want to walk you through the warnings issued by the institutions. So, in no particular order, let's begin here. The warnings issued by the oil What they're essentially saying is that

[00:32] the reason why the price of oil has not spiked higher yet more than it already has is because the world has been drawing on oil reserves. But that cushion is now nearly gone. So, we're going to begin

[00:44] with Exxon Mobil. Okay, so here's what Exxon senior VP Neil Chapman is saying. He's saying that as oil inventories fall towards minimum threshold levels, oil could go from the current 90-ish a barrel to 160 a barrel in a short period

[00:58] of time. Chapman says, and I quote, "We are approaching unheard of inventory levels. I mean really, really low levels. You can debate whether that's going to hit in 2 weeks or 3 weeks. But once you get to that point, then you'll

[01:12] you this. So, this is coming from the CEO of Chevron. And this is what he said "The buffers and the shock absorbers are being steadily drawn down. And the ability for the market to absorb this imbalance is drastically diminished

[01:27] today versus where we started." "Over the next few weeks, we're likely to see those pressures flow through more directly to physical prices. And there's more upwards pressure than I would expect as we get into June and certainly

[01:40] into July." Now, to confirm what the oil companies are saying, we take a look at the warning issued by the IEA, the International Energy Agency. So, the IEA is saying that the red zone may be in July or in August. But you

[01:54] know what? I I to point this out to you. Please note that oil inventories don't have to fall to or below the red zone in order for oil prices to spike up. What Okay, so what I'm saying by that is that if people see that we're on that

[02:08] trajectory going to the red zone and there's no resolution in sight, then of of course the price could start spiking higher as we approach that danger zone. market report so that you can see what they're saying. And as you can see, the

[02:23] going to read you the highlights straight from the report. It reads, "Output from Gulf countries affected by the closure of the Strait of Hormuz was 14.4 million barrels per day below pre-war levels.

[02:37] below pre-war levels. In April, OECD countries on-land stocks plummeted by 146 million barrels, while visible non-OECD stocks fell by 24 million barrels. And then here, the IEA says, "With Hormuz tanker traffic still

[02:53] restricted, cumulative supply losses from Gulf producers already exceed 1 billion barrels. On the supply side, Saudi Arabia and the UAE have successfully redirected some exports to terminals loading outside of the

[03:06] straits. At the same time, stocks from commercial and government strategic storage sites in consuming countries are flowing into And I just want to show you the

[03:19] situation of the United States Strategic Petroleum Reserve, the SPR. Okay, just so you know, this is our country's emergency stockpile of oil. This is how much oil we have in our SPR, and this chart goes back about 44 years.

[03:33] Back in 1982, we started off with about 270 million barrels in the SPR. It took about 27 years to fill it up from 270 million barrels to 725 million barrels. And then President Biden

[03:48] started draining it in an attempt to lower gasoline prices. And now President Trump is draining it also in an attempt to lower gasoline prices. Okay, so why are the presidents draining our emergency oil reserves?

[04:04] The honest truth is that it's political. It's in an attempt to plug the supply deficiency so that oil and gasoline prices don't spike faster. And of course, why is that? Why do they care? It's in order to win more votes.

[04:19] the corner. Now, you have to understand that this drop right here, like this is just starting and it's going fast. The most recent week's data shows a release of 9.1 million barrels.

[04:33] And that's just short of the all-time high release set the prior week. luxury of a huge stockpile anymore. We had 725 million barrels near the highs. Now we're down to 365 million barrels as

[04:46] of May 22nd and it's dropping fast. I mean, just take a look at where we are compared to previous periods. 365 million barrels, that is historically low. And again, it's falling fast. So yes, this is getting concerning.

[04:59] But you know what's a little bit wild, at least to me. We're releasing a massive amount of oil from our emergency oil reserves, right? But at the same time, we're exporting a record amount of oil to Europe and Asia.

[05:12] Like why are we not protecting our emergency oil reserves? my own question. It's probably because our allies are very upset with us and this is the least that we can do for them in order for our allies not to turn

[05:26] on us, at least not for now. But again, how long can this go on? The SPR data shows that well, this can't continue on forever. Like the cushion is depleting. Now, going back to the warnings issued by the institutions, even the Federal

[05:41] Reserve is issuing their warning. The president of the Federal Reserve Bank of Kansas City says that this oil shock may not be temporary. He says that he's skeptical about the recent price surge in oil as being

[05:53] transitory and the damaging effects of higher energy prices and inflation. Morgan Chase, issuing a warning that geopolitical conflict can contribute to

[06:05] higher energy prices resulting in higher inflation and higher interest rates. So, what Jamie Dimon is saying is that if this conflict does elevate inflation and going to make the Federal Reserve's job much more difficult.

[06:19] That's because if inflation is higher, then how's the Federal Reserve going to cut interest rates and how are they going to print money even faster than Because if they do that, that would be a terrible monetary policy because that

[06:31] would just add fuel to the inflationary fire. And then you have Goldman Sachs situation. So, they're saying that it's inventories are now approaching an 8-year low.

[06:45] concern about the speed at which with all that being said, a very good question is what is the status of the Strait of Hormuz? Now, I want to show you. Okay, so what you're looking at is

[06:58] Strait of Hormuz. And you can compare the average number of daily crossings before the war, whereas typically 120 to 140 vessels, depending on the season, passing through there every single day, 120 to 140.

[07:13] And now you can take a look at the just look at the significant contrast, how much it's dropped. And this is very bad considering that more than 20% of the world's oil supply passes through the Strait of Hormuz. And I just want to

[07:26] say that another relevance and important thing is that the ceasefire remains very Like I don't even know if you want to call it a ceasefire because last week Iran attacked vessels in the Strait of Hormuz that tried to cross without

[07:40] authorization. And then the US retaliated by bombing southern Iran. And then Iran retaliated by shooting a missile at a US base in Kuwait. So, this all happened last week. And then over the weekend, the US

[07:53] blockade uh is still there. They remained in place and they actually shot a Hellfire missile into the engine room of a vessel that was trying to get to an Iranian port. And also, US Secretary of War Pete Hegseth said over the weekend

[08:07] that the US is ready to restart strikes on Iran if no deal is reached. same thing either that they're going to get a great deal or there's going to be saying that he's going to be patience with Iran.

[08:23] Well, I just want to chime in by saying that okay, so patience is a virtue. Okay. However, we don't have the luxury of being too patient. Like, we don't remember that every day global oil inventories are being depleted. So,

[08:37] listen, I just want to tell you this. Nobody knows the future with 100% ball to tell you how the negotiations are going to go or exactly when the war And like, I don't have a crystal ball to

[08:51] oil is going to get to. But right now, the price of oil is around $90 a barrel. And then you have the estimates saying that they're they're warning like it's going to get to 130, 150, 160, 200.

[09:06] But, all I can tell you is that if the supply disruption continues, then obviously the price of oil is going to go up because there's more demand than I want to show you this. Here's the price of WTI crude oil and this is a

[09:20] 40-year chart. Right now, it's close to $90 a barrel. $90 a barrel. Can it reach $130 a barrel? And my response would be, of course it can. It reached $140 a barrel in 2008 and

[09:34] that's without the largest oil supply disruption in history. And if it hit $140 a barrel in 2008, accounting for inflation, that's probably close to $200 a barrel in today's dollars.

[09:48] And if that happens, we're going to be in store for just a devastating recession, like one that we cannot afford, and that's going to lead to massive money printing, like a rescue effort by the Federal Reserve. And

[10:00] listen, I just want to tell you that if that's the outcome that plays out, then I don't want to be blindsided and unprepared, and watch my portfolio go down by 30, 40, 50% before the money printing.

[10:13] it doesn't happen, but the market doesn't care what I want, and it may And I just want to say that I don't think it's crazy, like I don't think it's a far-fetched outcome considering the situation that we're in and how it's

[10:26] Like, I'm just trying to be a responsible investor by being prepared. Now, I just want to end by saying this. If you want to join thousands of other investors in my investing community, and get access to my portfolio, research, my

[10:40] chat room, then I'm going to leave a see you there. Thank you for the support, and wish you a very nice day. support, and wish you a very nice day. Take care.