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Great discussion on when Hormuz will break markets "There will be a covid moment where suddenly everyone realizes, oh God, this is real"

What if we are being misinformed in order to keep a lid on the oil price? What if talks are actually NOT going well and a peace treaty is NOT in fact imminent? What if there is no actual "cease fire" given ongoing kinetic action by both sides? What if Exxon and Chevron are right and working inventory levels are about to be breached in the coming weeks resulting in a price spike? What if the Strait does NOT in fact open, while everyone believes it will because "it has to"? What then???

Here is my take, which is consistent with the Goehring & Rozencwajg letter in the repost? ---- Every crisis—1997, 2008, 2020—starts with the same institutional script: treating a structural problem as a temporary liquidity glitch. Wall Street is hardwired to assume that everything will safely revert to a mean, fearing the phrase "this time is different." It takes months of frustration to realize the rules of the game have changed. Today, I fear we are repeating this exact behavioral trap. Believing the closure of the Strait of Hormuz is a brief, 60-day hurdle, governments and oil companies are aggressively draining inventories to bridge the gap. They are treating a potential permanent, structural deficit in the world’s crude supply as a short-term liquidity problem. Burning the lifeboats to build a temporary bridge only works if a resolution is guaranteed. By artificially delaying gradual demand destruction today, we ensure it hits all at once tomorrow should inventories slam into operational minimums. Why is the market so blind to this? Because over the last five years, macro investors have developed deep scar tissue from listening to "experts": * Q2 2020: Virologists scared investors into selling at the pandemic market bottom. * April 2020: Commodity bears screamed that oil was irrelevant right as it hit its historic generational low. * H2 2022: Economists panicked investors into dumping equities at the peak of 9% inflation. * Q2 2023: Banking analysts screamed sell at the market bottom following Silicon Valley Bank's failure. * April 2025, Policy Analysts scared investors about tariffs and Liberation Day to sell the low of the year. The market learned that when the experts scream trouble, buying the dip makes money, and hedging for disaster loses it. But ignoring the energy sector today, investors might be confusing past false alarms with a looming physical reality ... tanks really are running dry, and prospects for the Strait to "normalize" are nonexistent.

Copper hits highest monthly close in history

Global oil inventories are falling by 280 million barrels every month. Even if the market returns to the pre-February 27 situation of roughly a 1 million barrel per day surplus, every month of war creates nine months of inventory rebuilding. We are now three months into the war. That means 27 months of rebuilding. And that assumes the old surplus is still there. After the damage to oil infrastructure in the Middle East, even that 1 million barrel per day surplus is not guaranteed. Some countries will also hate how low their inventories have become and will want to build larger reserves. This means consensus will be surprised by how long oil prices stay high. We are not talking about weeks. We are talking about years. Add peak optimism around peace negotiations, and oil becomes a very attractive asymmetric investment. If the war flares up again, oil is also a powerful hedge for the rest of your portfolio.

Coming soon to a country near you

Japanese crude oil inventory chart is one of the wildest through the Hormuz crisis thus far.

The aluminum market is facing a deepening shortage as the closure of the Strait of Hormuz throttles supply. Combined stockpiles tracked by the LME, CME Group, and the Shanghai Futures Exchange would cover global supply for less than five days. (Bloomberg)

Strait of Hormuz tanker crossings have not recovered since the ceasefire

Three supermajors. One message: 🔴 Exxon SVP: $150-$160 within weeks 🔴 Chevron CEO: June & July = direct upward pressure 🔴 ADNOC: Hormuz won’t fully recover until 2027 And Exxon’s model is clear: ‘Once you hit the operational floor — Brent shoots to $150-$160’ We are at that floor. Now.

🇺🇸 Chevron's CEO said June and July will be worse. Exxon is projecting $150-$160 oil within 2-3 weeks. ADNOC says the Strait of Hormuz won't fully recover until 2027. And markets haven't reacted yet. Either traders know something 3 oil CEOs don't, or the real shock hasn't hit yet because the physical market is still catching up to the fundamentals. The buffers are gone. The spare capacity is gone. The next supply disruption doesn't get absorbed anymore… It goes straight to your gas tank. Source: Bloomberg, @jackprandelli

Most asymmetric oil trade since the COVID lows of April 2020??? Total and complete market apathy while both Exxon and Chevron say we are IMMINENTLY facing an oil price spike/shock.

"Approaching Unheard Of Inventory Levels": Exxon, Chevron Issue Apocalyptic Warning About What Happens Next To Oil zerohedge.com/markets/approa…

US distillate inventories sink to 23-year low | BOE Report boereport.com/2026/05/28/us-…

Chevron CEO Wirth on Oil Prices, Strait of Hormuz, Venezuela youtu.be/6iJSfeqr-TQ?si… via @YouTube

US fuel inventories are close to TANK BOTTOMS. STAY LONG OIL.

We agree, there are asymmetric upside risks in the oil market. $150 WTI this summer?

This is why we are bullish gold!

@robin_j_brooks your comments below reveal a profound lack of understanding of the oil market. Commodity futures price inventory, NOT expectations. That isn't ideology; it's a fact grounded in the economics of carry. The Brent price in your graph is not a risk anyone can actually hold — it's a spot contract stitched together at each expiry. In normal times that's a fair proxy; these are not normal times. Construct a series an investor could truly hold — a rolled BCOM index, or the USO ETF — and the picture inverts: it slopes hard up and to the right, consistent with the largest supply shock in history. USO keeps climbing because the shortage is showing up in the futures curve — not in the headline price on the screen. The carry pays an investor nearly 50% a year, even if the price of oil never moves. The SPR was drawn down before commercial inventories — when it is normally the other way round. Strategic stocks are meant to be the last line of defence, not the first, but this time Washington spent them first, managing headlines not risk. When you have no crude in storage, THEN and only then will the spot price move to a level to destroy demand. I have no idea if it is 150, or 200, or 250. The observed indication from Asia is ~200.