Why I'm Investing in Oil — To Protect Against a Stock Market Crash

[00:01] I'm investing in oil right now. So, this video is not sponsored. I'm simply just sharing with you what I'm doing and why. Oil is not paying me to make this video. Okay, so if you didn't know, right now the world is experiencing the largest

[00:15] oil supply shock in history and most people don't even realize it. one of the most important oil routes on Earth and millions of barrels of oil disappearing from global supply each and every day.

[00:29] And what's happening right now, I mean I just want you to know it's not normal. And I believe that the gravity of the situation is not being appreciated enough. In today's video, I'm going to break down very clearly what's happening

[00:41] in the Strait of Hormuz, how much oil supply is actually being lost, shrinking global inventories, and why this could push oil prices much higher. So, there's going to be no hype, just facts and logic. And let's start here.

[00:56] The Strait of Hormuz is one of the most critical oil routes in the world. Normally, about 20% of global oil supply flows through it. talking about one out of every five barrels of oil in the world. But right

[01:10] now, that flow has been severely disrupted. Shipping has nearly stopped. So, on a normal day before the war, we're talking about 120 to 150 vessels every day. But right now, it's dropped to about

[01:24] zero to 10 a day. Tankers are not passing due to a variety of reasons. You know, for example, well, first you have the fear of Iran blowing them up, you know, if you pass through. You have the US Navy, you know, the

[01:38] possibility of them being seized, and insurance companies pulling their coverage or just charging much higher rates to the point of infeasibility. And oil exports are being choked off. Okay, so let's quantify this. Of the 20

[01:53] million barrels that normally pass through the strait, about 7 to 8 million barrels are still getting out. So, some oil is still moving. Some got rerouted through pipelines, and some countries are still partially exporting.

[02:07] But, right now, the disruption, it's estimated to be at 12 million barrels per day removed from the supply. I mean, it's 12 to 13, but let's just say 12. So, that's still enormous. That's 12% of global supply and 30% of exports.

[02:25] And to put that into perspective, the 1973 oil crisis removed about 7% of the 1973 oil crisis removed about 7% of supply. This is closer to 12% of global So, that's why experts are calling it the largest oil supply shock in history.

[02:40] And we're already seeing the impact. Oil prices have surged above $100 per barrel, and markets are reacting to supply fears. Now, a very good question is, can the price of oil go higher from here?

[02:53] Now, here's something very important for you to understand. This price spike is not due to current shortages. No. The price has gone up in anticipation of shortages. So, this war drags out longer, and the

[03:07] Strait of Hormuz continues to restrict flows, then we're you know, honestly, we're truly going to see shortages at these price levels. Okay, so, in order to prevent shortages,

[03:21] You have to remember that the price of oil is simply a function of supply and demand. In order to prevent shortages due to supply disruptions, the price of due to supply disruptions, the price of oil must go higher in order to create an

[03:35] oil must go higher in order to create an environment of demand destruction. price? You know, in my opinion, it's not going to be at $130 a barrel. It's not going to be at $150 a barrel. I'll tell you why in a minute. So, this

[03:51] war drags on. Is it possible for the price of oil to go above $150 a barrel? price of oil to go above $150 a barrel? In my opinion, I believe yes, easily. I don't think that the market is taking this as seriously as it should.

[04:05] Okay, but why? Why is the market just brushing this off as if like this is not a major concern? I would say in my opinion it's because the price of oil is not spiking to record highs. Okay, so why is the why is

[04:17] highs? My explanation is because of oil inventories that are out there acting as However, they're being drawn down upon very rapidly. So, let's talk about the

[04:30] inventories. At the start of the year, global inventories global oil inventories were about 8.4 billion barrels. Okay, 8.4 billion barrels in inventory, we're talking about total commercial and

[04:44] government stockpiles worldwide. So, this includes commercial storages. I am talking about tank farms, refineries, terminals, floating storage, that's sitting on tankers, strategic reserves, etc.

[04:57] Okay, 8.4 billion barrels sounds like a lot, and it is. But, here's the problem. Only a fraction of that is actually easily accessible and it's being drawn down very rapidly, too.

[05:12] because once oil inventories drop too low, the market is going to lose its buffer. Okay, so we're talking about 8.4 billion barrels in inventory. So, why isn't the majority of that easily accessible or

[05:26] market ready? So, JP Morgan is saying that of that 8.4 billion barrels in global inventory, possibly 800 million barrels are realistically available, which is not much. So, first of all, oil that's

[05:40] stored in strategic reserves, mostly by governments, emergencies. So, yeah, governments will release a release all of it. So, it's not a part of daily supply.

[05:54] And location matters more than people realize. Oil is stored all across the world, but demand is global as well. So, if oil is in the wrong place, it can't solve a shortage immediately or

[06:08] many times cost effectively. You know, oil that's stored in the well, it I mean, it can't get out of the Strait of Hormuz if Europe needs it. And you also have to think about the release speed as it's very limited.

[06:23] Even if you wanted to use all inventories, you can't just easily dump into the market in a short period of time. It's not like, "Hey Jim, you know, help me release a billion barrels of oil over

[06:36] the next week. You know, send me 200,000 oil tanker trucks on Tuesday and have 400 oil vessels waiting for me at the port." It's like, "Uh, I can't send you 200,000 oil tankers this week. I don't have

[06:50] 200,000 trucks. I don't have 200,000 truck drivers. I don't have 400 oil vessels just on standby. Like, are you crazy? clean some stuff out of my home, you know, if I'm going to prepare to move

[07:03] out. It's going to take a while to release a billion barrels of oil. And some of that oil inventory isn't even market ready. It needs to be refined into usable fuel. And refineries can't just use any type

[07:16] of crude. I mean, it's got to be the right type. So, even if oil exists, it may not be usable where it's needed. Okay, so how much of that 8.4 billion barrels in inventory is actually considered drawable?

[07:31] You have estimates ranging from 800 million barrels from some analysts to million barrels from some analysts to 2.5 billion barrels from the EIA to 2.8 billion by the OECD. But if you suddenly remove 12 million

[07:45] barrels a day from supply, that's 1.2 billion barrels in 100 days. So in other words, about 1.2 billion barrels drawn down in 3 months. And the

[07:57] months already. But of course, you know, the panic's not going to start when every last drop of inventory is depleted. No, the panic's going to happen when the inventory levels drop to concerning levels.

[08:13] be? We don't know. But every day we draw closer to that critical point. But that's why prices are not skyrocketing up right now. Yeah, they're going up, but they're not shooting up

[08:26] because there's a buffer from existing inventories. However, that buffer is being eroded every single day. Now, I want to show you the price chart of WTI crude oil over the past 1 year. For most of the past year, it's been

[08:40] barrel range. So this chart clocks it going as high as 112 a barrel. You know, it went slightly higher than that. So listen, I didn't want to chase it when it was going up like that. So I waited for a pullback. I

[08:54] initiated my position on April 20th, right here. And I continue to hold. Okay, so why didn't I tell people about this earlier when the price was lower? Patreon site. So if you're looking for this type of information in real time,

[09:09] joining our community. I'm going to leave a link for you down below. Some very good questions are, is it too late to get in? Can the price go higher? If much? Listen, at the time of making this

[09:22] video, WTI crude oil is around $105 a barrel. So this is our price chart of WTI crude oil over the past 40 years. Now, I want you to take a look at this. Back in 2008, it went up as high as $147

[09:37] a barrel. And that's without a major supply disruption. And we're currently experiencing the biggest supply And another thing that I want to point out and mention is that

[09:49] when oil went up to $147 a barrel back in 2008, you have to remember that's 2008 dollars. So, just think about all the inflation that's occurred since 2008. Adjusted for

[10:04] that's going to be over $200 a barrel easy. And here we are at 105. You know, I got in in the '80s. So, is this the top at 105? You know, I'll tell you if this war keeps going on, the supply and demand

[10:19] dynamics suggests that that's not even close to the top. Well, listen, I just want to say this as full disclosure. I am not making a wild bets on oil. In reality, what I'm doing is I'm buying oil to hedge against the potential stock

[10:35] So, I believe in long-term investing. Like, I don't want to sell my positions in gold or silver or metals or the S&P 500. Like, I want to keep holding. I want to stay long. But then again, I don't want to see my

[10:48] my portfolio get destroyed by 20% or more, even if they may be unrealized losses. Therefore, yes, I'm buying oil to make money, but it's really serving as a hedge for my overall portfolio.

[11:02] Because if oil prices spike and the stock market crashes, then of course, I'm going to be much happier seeing my portfolio down 10% or 5% seeing my portfolio down 10% or 5% rather than 20% or 25% or 30%.

[11:16] Additionally, if oil prices you know, go higher and they crash the markets, then the money that I make from my oil, I'm going to use that money to buy the dip. So, honestly, like, I'm just speaking,

[11:30] you know, very straightforwardly. Like, I would be happier if the war ended and up. But there's this is a real possibility that an oil shock can crash the stock market, so I'm just being prepared. Now,

[11:43] I want to be absolutely clear about this. This is not a risk-free trade. one, of course, is de-escalation, which could reopen supply. But just judging from the situation, does it seem realistic in the near

[11:58] future? Like I don't know what your opinion is, but it doesn't look like it to me. So, listen, the situation is so bad that President Trump is asking other countries to help to reopen the Strait of Hormuz.

[12:11] Listen, are we bigger and stronger militarily than Iran? And the answer is, of course, we are. Like, obviously. But this is like a lion trying to fight a porcupine or a honey badger. Like, it's not going to be an easy fight,

[12:25] simply due to the size and terrain of Iran. Now, can we force Iran to reopen the strait militarily? In my opinion, I would say yes, absolutely. But at what cost?

[12:39] militarily, then Iran's going to knock out all the oil infrastructure in the Gulf, and then there's going to be no point in in the short term, because all those Gulf producers, they're not going to

[12:53] their infrastructure is going to be obliterated. So, I'm telling you, this is a bad situation. So, to conclude, when I look at everything happening, the Strait of Hormuz disruption, the war and geopolitical risk, the loss of millions

[13:07] of barrels per day, the drawdown in global inventories, I'm telling you, this is not a normal environment. This is a structural supply shock, and that's exactly why I've been investing in oil. Again, if you want to

[13:20] join me on my Patreon site, I'm going to leave a link for you down below, so you buying oil in the stock market, the position size that I'm taking, and when I plan to get out. Thank you so much. I wish you a very nice day. Take care.