The market is kind of shrugging this all off.
What size of a relief are you expecting when it comes as far as a week?
We hear the latest round of 15 million, but what options are the US have moving
forward and wanting even on? So the options are extremely limited.
And the SPRO believes that the Biden administration announced yesterday 15
million barrels in December. Let us remember, it is actually a part
of the hundred and eighty million barrels total that they had announced in
March, which was actually supposed to be completed by September.
But they were just unable to find takers for that amount of oil.
Look, the SVR release, to my mind, has become a bit of the you know, the only
tool you have is a hammer. You tend to see every problem as a nail.
Right now, what the US needs is especially going into the winter demand
season, high demand season on both sides of the Atlantic northern hemisphere is
fuel stocks, especially distillate stocks, diesel and heating oil.
And they're running very, very low on doors.
The U.S. refining system is cranking out running
at almost 90 percent operating rates, which which is quite high for this time
of the year. Because let us remember, it's supposed
to be turnaround season through September and October.
And they're just still draining down their refined product stocks, which is,
you know, which is what the market needs, not crude, but is the thing is
doing having a release from the Strategic Petroleum Reserve is only a
short term fix, is it not? I mean, why do it?
It is indeed a very short term fix and it is putting up a lot of bigger
problems down the road as a lot of the US lawmakers have already been pointing
out and criticizing the Biden administration for draining down the
reserves so rapidly because they've been asking, when are you going to replenish?
What are the kind of prices you're going to be prepared to pay to replenish?
Their current reserve was stopped at an average price of less than 30 dollars a
barrel. So, you know, of course, it's it's going
to be replenished at a much higher cost. But do your other question.
You know, there really aren't any other tools left.
You know, we're hearing about the not big bill, which is not going to fix
anything in the short term. And so I don't think in the medium to
long term either, you're hearing of some proposals to reduce or completely
curtail refined product DAX exports from the US.
I don't think that's practical either. You know that it was refiners are going
to be extremely upset and the US then risks leaving Europe in the lurch, you
know, which is depending on US refined products as it moves away from the
Russian barrels. So no options.
This is probably SPRO is probably the the least of the worst options.
How would you describe this relationship between the US and the Saudis?
Right. Is it is it basically beyond repair?
Is there any signs of an off ramp in your eyes?
It's the nadir as far as no one can look back to the past three, four or five
years. You know, it was the big decision to cut
production, you know, after repeated entreaties by the US over the past
several months, actually more than a year now to actually increase output was
seen as a smart, you know, not not surprisingly.
And it's it's it's the nadir of the relations.
Do they ever change in in future? And it's very hard to say right now.
The biggest priority for Saudi Arabia, as I see it politically, is to keep
Russia in the forward. And, you know, for the foreseeable
future, I think, because I think Saudi Arabia has been this is pretty cool with
pre Ukraine. Saudi Arabia has been very clear that
the future of warfare is as all back plus and they definitely need Russia in
the fall. So, you know, was Russia behind the
decision to cut output Russia? We know Russia needs prices to be higher
as it looks at supply volumes declining. You know, most likely it was.
And I think Saudi Arabia has made a very clear center bakir signal, whose side it
is going to take because its interest lies in preserving or back plus.
Yeah, and how do you assess this? This Russian cap on oil, what impact it
can really have? Well, first of all, we have to see
whether it really comes through. All the skepticism that you have been
hearing from market participants, analysts.
You know, I have openly talked about it. It's just makes more sense.
It's unprecedented, untested, and it's very unlikely to work.
It is, however, unfortunately, becoming yet another element of uncertainty.
We've seen recently China and India becoming a little more cautious on on
buying Russian barrels are pleased for the you know, around the period of the
EU ban December 5, that kicks off to players because, you know, they're
they're saying if the price gap plan doesn't work, if they don't sign up for
that coalition, then good. The US resort door, extraterritorial
sanctions, you know, secondary sanctions on these still countries.
So and we do need these to market these these two countries to buy more Russian
oil rights to keep Russian oil flowing into the market even after the EU ban.
So we have to see it's just a huge
uncertainty at the moment. And I wanted to just dovetail into
what's going with natural gas prices. I mean, we saw them peaking off in about
June. We're down 62 percent from that peak.
Does that mean that the market is not pricing in perhaps a better situation
for Europe in particular in the winter? And if so, what does that entail?
No. I think the market and Europe,
especially EU, is going to remain on tenterhooks going into the winter
season. The slight relief that we're seeing now,
which may well prove temporary, is mostly because Europe has managed to
store gas and gas shortage in the EU countries.
It is at more than 92 percent, which is a comfortable level.
They've managed to do it much before their deadline.
They have a lot of LNG coming in, a lot of LNG ships waiting at the shores to
discharge. So they have that level of comfort.
I think the biggest danger is if it turns out to be a harsh winter, gas
demand goes up much more than the previous seasons.
And if Russia cuts off, you know, whatever little gas it is still sending
into into Europe and you know, again, that is unpredictable.
We don't know what Putin might do. So they just have to, you know, hunker
down, sit tight and pray for a mild winter and that Putin continues to send
whatever gas that he is still sending. Do you?