- “We’re approaching unheard of inventory levels”…
- Warning: We’re running down our pre-war inventory…
- Elon Musk just unlocked the biggest investment opportunity of the year.He’s about to take SpaceX public in what’s set to be the biggest IPO ever. The New York Times predicted it “will unleash gushers of cash for Silicon Valley and Wall Street.”If you click here and learn what to do…”
Dear Reader,
Exxon Senior Vice President Neil Chapman, Thursday last:
- Commercial inventories of crude oil, of… petroleum, gasoline, diesel, jet fuel, they’ve all run down… We’re approaching unheard of inventory levels. I mean, really, really low levels.
- You can debate whether that’s going to hit those really low levels in two weeks or three weeks. Once you get to that point, then you’ll see prices shoot up… Once you get to that really low inventory level, up to $150, $160.
- The models would tell you that… And so we’re at that level right now.
In worrisome conclusion:
- I think crude being in this sort of $90 to $110 for the last… six weeks, has really been mitigated by running down inventories. It can’t last forever.
“It can’t last forever,” said the fellow. And that which cannot last forever does not last forever.
Ready for the Possibility of Gas Lines?
The present range — $90-$110 oil — constitutes a nuisance, a thorn in the flesh. Yet $150-$160 oil?
Here you have a migraine on your hands.
Add the gentlemen and ladies of HFI Research, with cracking voices:
- We are ~9 million [barrels] away from hitting a storage level that’s the equivalent of living paycheck to paycheck for gasoline…
- Once we get there, even a minor disruption (any sort of outage) will result in gasoline lines at gas stations.
Meantime, analysis by The Brookings Institution concludes that present global stockpiles should run dry by July.
$150 oil is then in prospect, the analysis concludes — in close alignment with the abovesaid Exxon grandee.
Should the Hormuz Strait open fully immediately to traffic, the kinks would require many, many months of unkinking before flows normalize.
No Resolution in Sight
And I argue… with galactic confidence… that the Hormuz Strait will not fully open immediately to traffic.
Just yesterday the barbs, insults — and missiles — were hurling again.
Iran claims the United States visited violence upon its Qesham Island. In response, Iran pursued retribution against United States targets in Kuwait and Bahrain.
President Trump nonetheless claims that peace discussions with Iran persist. Iran claims that peace discussions not persist.
And so the show rolls into its third dismal month. It represents a hazy twilight of neither war nor peace, of something resembling each, yet neither.
No resolution forms on the horizon. Yet the prospect — the potential prospect, I should disclaim — of $150-$160 oil does form on the horizon.
The Bright Side
I concede the possibility that freshening winds will blow this thick, gray cloud away from our shores.
I have reported many false alarms before. And I have munched plates of crow as punishment.
And as argued the incomparable Mark Twain: “I’ve had a lot of worries in my life, most of which never happened.”
Perhaps $160 oil will not happen. Perhaps recession — or worse — will not happen.
Yet perhaps they may. And perhaps the “cushion” of existing “inventory” upon which we are resting is fast deflating.
When the Inventory Runs Out
Writes a certain Lawrence Winnerman in The Ashland Chronicle:
- The economy we are walking through this week was bought before the war — the gas, the groceries, the shipping containers, the labor contracts, all of it loaded onto trucks and tankers and warehouses when the world was a different world.
- We are running an economy this week on the country we were in February. The shelves still look mostly normal. The shipping bays still seem mostly full. The cargo still appears mostly on time where it is supposed to appear.
- None of this is the world we are actually living in. We are spending down the last inventory of the country we used to have and we are spending it down on a clock.
- Inventory is mercy. Inventory is the cushion the world leaves you between the moment a thing breaks and the moment you feel it break. The blast wave is real, but the blast wave is also delayed by the length of a supply chain, by the contents of a warehouse, by the days it takes a tanker to cross an ocean.
- We have this week the strange privilege of standing inside the cushion. We will not have that privilege for long…
In conclusion:
- The pre-war cushion runs out somewhere between August and October. That is when this country becomes a country we have not been in before.
A cry of wolf? A false alarm? “Fear porn?” One of Mr. Twain’s worries that never happen?
Perhaps it is all of them. I pray upon both knees that it is all of them.
We will know before long.
Regards,
Brian Maher
for Freedom Financial News
