So, Neil, let's start with how interesting that China's Covid lockdown
hurt the demand for oil. China is reopening and back in the
driver's seat. So where does this what does this all
mean for oil companies right now in China?
Well, that's a clear positive, particularly for the downstream
companies. We saw a sign of fact report results
yesterday and they guided to 7 to 8 percent growth and refined product
demand this year. So that's about a million barrels a day.
If you apply that to China overall. So it's going to be a very strong year
for downstream demand. So if you are positioned in refining
chemicals, that recovery that you see in demand for petroleum products can be
very positive, not just for volumes, but also for margins.
So is the frosting on the cake? Going ahead and maybe not in the
previous quarter, but going ahead. Not.
Not a good situation for the Middle East, but the clash between Iraq and the
reach and the Kurdish regions that is continuing to boost prices.
Is this price rise going to continue? And again, it's just just going to kind
of add some some juice of fuel to a gain in profits for these companies.
Yeah. I think that, you know, obviously last
year was an incredible year for oil companies globally.
When we saw Brent average one hundred dollars a barrel last year.
I mean, this year, we think we're going to be maybe somewhere between 80 to 90
dollars a barrel. So maybe a little bit lower than last
year. But if you look at the market dynamics,
you know, we are an oversupplied market right now.
But as we move into the second half of the year, the combination of growth that
you're going to see in Chinese demand, plus further curbs in Russian exports as
a result of EU sanctions, you know, should lead to Brent trading higher than
we're seeing right now. I think the biggest risk to that
scenario is clearly if we enter some sort of recession in the second half of
the year and clearly those risks of have increased since since since the start of
2023 three. But, you know, overall, I think the sets
of us still looking pretty constructive for oil.
When you take a look at the strength of the Chinese recovery time, is there a
fear that we're sort of pinning our hopes on an economy that
even the recovery that we've seen so far has been weaker than expected?
Yeah, I think that's fair to say that, you know, the recovery maybe has been a
bit lackluster. But I think, you know, we've got to give
it time. We're still at a fairly early, early
stage in the recovery. But if you look at just the numbers, I
mean, we actually saw oil consumption decline in China last year.
We haven't seen that for over 30 years. And if you look at just, you know,
consumption of, you know, jet fuel, which was almost a third of what it was,
it pretty Covid levels. I mean, we're seeing a strong recovery
in airline demand in China. You're also seeing increased demand for
from ability really across the board, which is boosting, you know, gasoline
consumption. And if you look at the chemical sector
as well, which has been a big driver of demand, that's a lot of capacity coming
on this year. It's also going to boost consumption.
Talk us through some of your picks across a pack in the energy space for
China. Sihanouk was one of them.
And you also like Woodside? Yeah, I think you see it.
You can Woodside or the, you know, two companies that you have to own if you
believe in higher commodity prices you've seen it obviously creates a very
large discount to its intrinsic value being on the U.S.
entity list. And we see a lot of upside there,
particularly with a free cash flow. It almost close to 20 percent for that
stock and dividends around 10, 15 percent.
You know, for Woodside, it's really benefited last year from know higher LNG
prices as a result of Russia's invasion of Ukraine.
We're seeing LNG prices come off in the first quarter.
On a milder winter in Europe. But as we go into the winter ahead, we
see very little incremental supply coming on.
We're going to see greater competition for LNG cargos from China.
And the you know, overall, the situation still looks pretty tight in the market.
So we expect LNG prices are going to come back again in the second half of
the year. That will benefit
Woodside, which is really the premier LNG company in the region.