These Oil Profits Don’t Need the Hormuz Chokepoint

When the CEO of Chevron stood in front of a crowd a month ago, his warning should’ve echoed across media headlines. 

He told us flat out that we’ll soon start seeing physical shortages — actual shortages to the point where there isn’t enough crude moving to the refineries that need it regardless of what price buyers are willing to pay.

That’s a league far beyond mere price spikes and market volatility, and the context was already on the table. 

You see, the IEA had characterized the closure of the Strait of Hormuz as the largest supply disruption in the history of the global oil market. By now, everyone realizes that roughly 20% of global supply normally transits that 22-mile chokepoint. 

Of course, most of it stopped moving when the war started in February. And before you get excited over headlines saying the Strait is fully open, the sobering fact is that pre-conflict tanker traffic IS NOT flowing at the same pace (yes, it’s better, but nowhere near normal levels). This misplaced optimism over the recent MOU could turn disastrous. 

Also keep something critically important in mind during the next phase of the current 60-day ceasefire — the bigger issue isn’t getting tankers trapped in the Persian Gulf out, it’s getting them IN!

If you’re like me, you’ll notice that whenever “rising” tanker traffic is mentioned in your news feed, it’s always about outbound traffic. The problem is that without a strong, steady flow of tanker traffic headed back in, producers like Iraq will need to throttle back their field production (spoiler: they just did!)

Since February, the world has been drawing down inventories at a rate of more than 10 million barrels per day. 

No matter how you look at it, that’s simply not sustainable. 

WTI prices may be below $70 per barrel on Friday, but ask yourself: Where do you think oil prices will head once we stop releasing up to 9 million barrels from the SPR on a weekly basis?

Even after dumping SPR barrels onto the market and putting storage levels at multi-decade lows, global stockpiles have fallen to eight-year lows — around 101 days of expected demand. 

Meanwhile, refined products stockpiles are even tighter at around 45 days (down from 50 days before the war).

Goldman recently estimated that Persian Gulf oil production has declined by 57% — that’s a supply hole that commercial inventories, shadow tanker fleets, and strategic reserves have been filling. 

Unfortunately, that buffer is running out. 

Chevron’s warning wasn’t speculation, it was a plea for sanity. After all, you can only drain reserves so far before supply actually stops responding to demand, regardless of price. 

And that moment is quickly approaching.

The impact hit Asia first, since the region depends on Persian Gulf oil for the vast majority of its supply. Europe follows that chain of consequences, as the EU members import 75% of their jet fuel from the Middle East. 

The U.S. may have less exposure because it’s a net exporter, but even California gets Middle Eastern crude.

We already know that any barrels coming out of the Strait of Hormuz are going straight to China, which makes you have to ask: if the oil that normally comes through Hormuz isn’t coming through anymore, where does everyone else get the barrels they need instead?

If 20% of global crude supply runs through a 22-mile channel controlled by a country that has now been in active conflict with the United States and Israel for four months, we’re staring at a structural repricing of where reliable supply actually comes from.

Every refinery operator in Asia and Europe that spent the last four months scrambling for alternative crude supply is now having a fundamentally different conversation with its procurement team. 

They’re not looking to manage a temporary Hormuz disruption. They’re preferring to structurally reduce dependence on barrels that transit a war zone.

The answer is deepwater… but we can get even more specific than that.

The Only Oil Supply That Matters, And Who’s Pumping It

Now this is the critical insight that reshapes energy investment — when 20% of global supply is cut off and the replacement isn’t flowing at pre-war rates, the value of supply that doesn’t go through the Strait of Hormuz becomes structural.

Brazil may be the answer. 

The country is producing over 4 million barrels per day from the ultra-deepwater pre-salt fields in the Santos and Campos basins, and nearly 80% of that production comes from reservoirs beneath thick salt layers several miles underwater. 

This is some of the most technically demanding wells ever drilled (and also some of the most productive).

That’s why Petrobras is investing $109 billion into their operations between 2026 and 2030. 

Of course, almost three-quarters of that will go directly to pre-salt exploration and production. 

The Búzios field alone has multiple projects under active development with new FPSOs coming online throughout the year. 

And one thing we can count on is the fact that every barrel Petrobras produces has a buyer standing in line.

The Gulf of Mexico is seeing the same dynamic. 

You see, operators who were cautious at $60-70 oil are now running completely different economics. Ultra-deepwater drillships are running at more than 85% utilization, and unlike their counterparts drilling on land, offshore rigs that were sitting idle 18 months ago are being contracted.

Brazil’s pre-salt barrels don’t go through Hormuz, they’ll ship directly to Asia, Europe, and the U.S. Gulf Coast. 

We’re talking about an oil supply that’s geopolitically insulated from the Strait’s risk.

In February 2026 — the same month the Hormuz closure started — Transocean and Valaris announced a merger worth approximately $5.8 billion. 

That’s two major competitors merging and holding a combined contract backlog of $10 billion.

You don’t merge in a capital-intensive, cyclical business unless you believe the upcycle has years left. 

Big Oil’s Big Warning

Chevron’s CEO just told you physical shortages are coming. 

They may not show up today, or even tomorrow… but the countdown has started. And the infrastructure to produce, move, and process the replacement supply has been underinvested for years — it’s only being rebuilt now at the pace the world actually needs.

Now, the companies positioned at that chokepoint — deepwater producers, the FPSO operators, the offshore drillers — are collecting premiums the market hasn’t fully priced.

Tomorrow’s oil won’t go through Hormuz, it’ll come from deepwater.