You hear that, Mr. Anderson? That is the sound of inevitability [XLE & XOP]

**Disclaimer: All of this information was checked for errors but some may exist. Take this at your own discretion, this is an opinion of a regard on WSB. I own calls on XLE and XOP which I might close at any time or maybe I diamond hand them until they expire worthless, that decision is mine and mine alone. If you decide to establish a position similar to mine or contrary to mine, that's on you and you alone. This is not investment advice, I just like these ETFs.**   https://preview.redd.it/d1j8of4j6b5h1.png?width=498&format=png&auto=webp&s=2a6fc85eb2b66b963be0d5b4b6b27d8481c50c9e   **TLDR :** There is too much demand at the current oil price and our current trajectory has us hitting 5 year lows in commercial crude inventories in two weeks.  We are on pace to breach estimated operational minimums by July 17^(th).  It’s my opinion that we will not breach operational minimums because crude prices will increase to the point demand is crushed.  I don’t think anyone knows what price level that is, as Chevron CEO Mike Wirth stated, “You get to very high numbers…”   The source for all US inventory data is from the EIA.  [https://www.eia.gov/petroleum/supply/weekly/](https://www.eia.gov/petroleum/supply/weekly/)   **The Inventory Tide**   US crude commercial stocks typically see average weekly builds and draws of 2 million barrels a week depending on what time of the year it is.  Stocks are drawn down in the winter as it's refined into heating oil so the North East US doesn’t freeze to death.  Stocks build as refineries reluctantly complete the absolute minimum maintenance on equipment to hopefully stay out of the headlines.  Refineries then produce as much gasoline as possible so Timmy can make it to soccer practice in a large SUV and Brad can take his lifted truck from his home in the suburbs down to the beach.  After running balls out through the summer another maintenance period begins before producing heating oil so the North East US doesn’t freeze to death… ad infinitum.   https://preview.redd.it/hcbznf4j6b5h1.png?width=1000&format=png&auto=webp&s=2ba131d0b509e63dc60dcd77d6054d92cba4f83f   **Middle East Boogaloo : While we're at war, America's at the mall…buying AI stocks**   Entering into 2026 we were slamming oil into storage faster than you can hit the bid for another Micron buy.  Multiple calls were made that forecast oil to trade in the mid to low 50’s as inventories rose.  That all changed when the Strait of Hormuz closed its legs and prevented the world from getting the crude and other products they were hooked on.  That’s when they turned to big daddy America to get their fix.  Crude draws have absolutely exploded to 15 MMBO a week from normal market swings of +-2 MMBO.  Energy analysts are losing their minds over broken supply chains while the rest of the world is sitting at home buying AI stocks.   https://preview.redd.it/4be7xg4j6b5h1.png?width=1272&format=png&auto=webp&s=68b2ad6c52cc72e9fbee2f0e2676cbbd9eb973f8     The Strategic Petroleum Reserve (SPR) is America’s oil rainy day fund and it's pouring outside.  We started the crisis with 415 MMBO in the bank and were authorized to release 172 MMBO to the market.  We have pulled about 9 MMBO a week from the SPR over the last month and will likely continue that withdrawal rate until either the salt caverns collapse or we hit the authorized limit.  At the current pace of withdrawal our checks start bouncing the week of August 28^(th)  (Week 35) and that’s when commercial stocks would have to absorb the full withdrawal rate.   https://preview.redd.it/bbjj2h4j6b5h1.png?width=1026&format=png&auto=webp&s=d18fcd5fbd12f5560575f22f17a24405c5c27031     **Why None of That Matters And Crude Is Likely Going Much Higher**   The entire exercise is more pointless than Europe trying to compete with the US in AI.   The problem is that the oil inventory number you see is actually a lie.  It’s like the peanut butter on the bottom of the jar or the toothpaste you can't get out of the tube.  Transfer pumps require a certain fluid level, head, to operate.  The pipelines are full of line pack and the oil storage tanks have tops that have to float.  Minimum operational volumes are estimated at around 380 MMBO but the reality is that no one actually knows because we’ve never been down to those levels before.  **What we do know is that the week of June 19****^(th)** **we will be at the lowest levels of crude oil inventory in the past 8 years.  At the current pace of withdrawals we are on track to breach the believed minimum operational levels by July 17****^(th)****.**   https://preview.redd.it/ocejuf4j6b5h1.png?width=936&format=png&auto=webp&s=9d791936ed8d7852c20ae3c13ce7fc01b97172a1   None of that matters because we quite simply won’t breach those levels.  XOM SVP Neil Chapman recently warned physical Brent might shoot up to 150/160 bbl in the coming weeks.  Chevron CEO Mike Wirth noted that June and July are critical months as inventory bins scrape the bottom and the market is assuming the conflict is near its end.  While Mike didn’t put out a high end price target he noted that if the Strait remains closed you get to very high numbers.  Anyone making up an oil price target for the level of demand destruction necessary to prevent operational failure is extrapolating into a region we’ve never been before.   Chevron CEO Interview   [https://www.youtube.com/watch?v=6iJSfeqr-TQ](https://www.youtube.com/watch?v=6iJSfeqr-TQ)   XOM and Chevron Warning   [https://finance.yahoo.com/sectors/energy/articles/exxon-chevron-warning-oil-prices-110500710.html](https://finance.yahoo.com/sectors/energy/articles/exxon-chevron-warning-oil-prices-110500710.html) **The impossibility of current withdrawal rates**   https://preview.redd.it/1kin6h4j6b5h1.png?width=1058&format=png&auto=webp&s=35b0f678e8b908da498471cde112650845c0fa79   **My Thoughts on What’s Coming**   We are too far into this crisis for the timing of the Strait of Hormuz opening to matter.  In my opinion we are weeks away from a repricing event.  XOM’s SVP and Chevron’s CEO are saying that inventories are brutally low.  Refined products have been at critical levels for several months with jet fuel trading at some points between $180-$220/bbl. Diesel has already been retailing for almost $250/bbl.  Up until this point the inventory levels of commercial crude stocks haven’t resulted in pricing at those levels.  I think that changes shortly.   The global oil market was believed to be oversupplied to the tune of 0.5 MMBPD to 1.5 MMBPD heading into the crisis. There has been damage to oil producing facilities in the Persian Gulf.  To what degree is unclear and we won’t know until facilities come back online.  Kuwait recently said it will take them 6-8 weeks to hit 70% of pre-crisis production and 10-12 weeks to restore production once the Strait opens.  ADNOC (UAE) is saying that it will take a minimum of four months to restore production rates to 80% of pre-war capacity and a full normalization that might take until the middle of 2027. Even with the Strait of Hormuz reopened we will likely still be short several MMBPD of crude for quite some time and that doesn't even contemplate the complications of getting the oil tanker chain rolling again through the Persian Gulf. How likely is it that enough tankers will want to go back into the Gulf? We will find out.   It’s still unclear when the Strait will actually open and what that even means.  Everyone keeps discussing the issues of Iran’s potential tolls from the perspective of levies on oil tankers but are forgetting to mention that the GCC Persian Gulf states import 70% of their food through the Strait.  The oil can be routed around the Strait of Hormuz through pipelines but you can’t ship bread, sugar, and other goods by pipe.  I quite simply don’t see how these countries would ever allow Iran to have total control over their future in perpetuity.    Iran has seen that there is not enough will in the West to put boots on the ground and force them to relinquish control.  I’m not going to wax poetic but I don’t see them relinquishing their newly discovered control for any incentive. That is quite the pickle we are in.   https://preview.redd.it/jgl7kf4j6b5h1.png?width=750&format=png&auto=webp&s=f84fa82ddfa412441799a7c38f915368ef92819c Iran RN    Positions   https://preview.redd.it/bnmzye4j6b5h1.png?width=936&format=png&auto=webp&s=2c2e61b0d375ff796bc34c21dbae64d93cc3e0a2