Out of that trust factor of influences, what is most notable to you at the
moment? What's the most powerful factor that
we're seeing moving the markets? We know the China story is a major one
today. Yeah.
Morning, Heidi. I would probably say yes.
Keep an eye on how China's core pivot progresses.
I expect it's going to be quite chaotic, confusing certainly for the markets,
maybe two steps forward, one step back. It's obviously on completely uncharted
territory. As it was just mentioning be all over
the weekend. We had some more cities are starting to
ease testing requirements in terms of how public is allowed to access some of
the public spaces and so on. And look, as the second largest oil
consumer in the world after the US and the single biggest contributor of demand
growth. You know, clearly China is key for the
oil markets. The problem here is that's going to be
lots of uncertainty and unpredictability around its Corbett's pivot.
When you take a look at the dynamics of crude pricing, the sanctions that take
effect today. Are they going to make a meaningful
impact on pricing? I know it's the price gap.
I mean, in a way, I guess politically it saves face for the EU that they actually
managed to agree on a number. But for all practical purposes, it's
completely immaterial. Even as the price gap has been set
currently at 60 dollars, it's about five dollars above where Russian crude has
been trading towards the end of last week.
So it's certainly not going to achieve one of its critical aims, which was to
try and cream Russian oil revenues if it were trying to ensure that European
shipping companies, insurance companies, CNI clubs sort of remain in the game,
you know, continue to have that business of Russian crude flowing into into third
countries. I don't think that's going to happen
either, because China and India have remained noncommittal and I don't expect
them to sign up now either. And the third intent was, of course, to
try and avoid a supply crunch and a price rally.
Well, that's not happening, but that's more because of, you know, demand
concerns and China demand concerns and, you know, economic downturn rather than
as a result of the price gap. So it's really, as I said, it's
immaterial. So Amanda Lang, you say the second big
pivot to watch is the Fed. And of course, after the Friday numbers
that the pivot is not expected by Fed watchers to be weaker.
You know, going back from rate hikes, it's expected to perhaps making them
even go higher and last longer. What does that mean for oil?
So Gatlin, you know, this is definitely another sort of choppy waters there from
a very financial globe. Broader financial markets are going to
continue speculating and and, you know, moving up and down, a great deal of
volatility. Now, what we've seen in the past few
weeks is that oil hasn't always moved in lockstep with the return of risk
appetite in the financial markets with regard to the Fed pivot.
On some occasions it has. On some occasions it hasn't.
By and large, a Fed pivot if the euphoria is back in the market or as and
when it is back in the market, that is a prop for crude because we see that
typically. Well, of course, that gives investors a
bit of relief in terms of how badly the U.S.
economy might be affected. So that's that's positive for oil
demand. And it typically batters the US dollar,
which also ends up being a profit for crude prices.
But again. So, first of all, I don't think
personally that this Fed pivot story is going to be concluded one way or another
in terms of market sentiment. And second, we won't always see a
positive correlation. So that's another uncertainty out there.
You said barring any rude surprises of Russian oil flows, you expect pressures
to rate under downward pressure because of the onward, the global economic
slowdown and the heavy discounts on those Russian products.
Exactly. So, you know, as of now, I think the EU
has put the cap is about looking to put Russian crude at about 20, 25 dollars
discount to Brent. But, you know, going forward, obviously,
the freight rates are expected to rise because there's going to be fewer ships
in the pool available for it to move Russian crude.
If you shipping companies remain out of this trade, as I expect them to.
So freight rates are going up as a result, the buyers like China and India
are going to ask for deeper discounts for Russian crude oil to offset that
higher freight costs. Look, Russia, a market is shrinking
right, to more than one million barrels per day.
That was still going into the EU as on a seaborne basis is now not going to go
into that part of the world. So there'll be more barrels and fewer
buyers for Russia. So I expect actually the Russian
discounts to continue sinking, basically higher discounts.