Germany and the Europeans the UK the US are all looking at various forms of sanction. If there is an incursion
what is the probability in your view that there is a form of incursion. And what will be the biggest consequence of that for
energy markets in Europe. So there will be some form of incursion. I would say 80 90
percent. I think we want to ask though what is the risk that we have an incursion that triggers punishing sanctions. And on that
I'd be lower Manus. I think it's around 30 percent. I know it's a little lower than most folks. We think Putin will pull his
punches. And the West certainly the Europeans are in no mood to want to put punishing sanctions in place. So we put it about 30
percent. If he does that if we were in that 30 percent world tanks across the border it's real. The president has already
signaled the sanctions are coming in the technology area in the financial area not the energy area. That's why I think from an
oil perspective certainly the risk here is not bullish for oil. I get it. It's a knee jerk to buy oil if you think there's going
to be a war but very unlikely to see an interruption in that four point seven million barrels a day of crude and products
that Russia sends to Europe and ex China Asia and the United States. Very unlikely. Neither Putin wants to cut that nor do
we. So you have to have a worst case scenario a war. Sanctions that are very unlikely to see that cut off gas is another story.
Natural gas especially the transit gas through Ukraine that could have a accident. And Putin could claim deniability. He
could say I've nothing to do with it you know. But suddenly that disappears. You know when natural gas it's more likely. I think
it's very likely. But more likely. But oil. It's more of a macro bearish driver than a bullish when I think.
Bob I mean there is always the risk of fanning the fan the flames of the geopolitical risk premium which some would argue
it's kind of faded a little bit. There is a degree of complacency a degree of taking energy supply for granted a lack
of investment in some new infrastructure to provide for the energy of the future.
How do you expect OPEC to react to this kind of geopolitical rise intentions given that they meet on a monthly basis now
pretty much open. Plus kind of the central bank of oil. How would they respond.
Well you know in some ways and I hate to say it as an avid OPEC watcher as the market tightens and we enter a structurally tight
market OPEC or OPEC plus becomes less important and geopolitical risk becomes more important. And it's all a functioning of that
shrinking spare production capacity now below four million barrels a day. And you know we're gonna go back to 2010 to 2014
where they met. They did nothing and no one really cared. I'm not going to say it's going to get that boring but really OPEC.
Plus they just sit there. They have to tap out and increase by 4 NKBD and those few countries with spare capacity will
increase. But on this track they're going to become less relevant. In some ways they're going to do what they're gonna
do. They're managing the market very well right now but it's that's shrinking spare. That makes every barrel of disrupted
capacity or disruption bullish for the crude oil risk premium. So that's why I think that the Hutus shot missiles and drones at
Abu Dhabi. In some ways is much more important than I think even the risk posed by the Russia Ukraine crisis when it comes to
oil. Now that's interesting so how nervous should we be. Because with
it various people come on the show with use of an ISE say stop panicking. This region has been battered by Hutu rebels on a
number of occasions for many many years. The risk is it's a tight market. What are people saying to you. The real risk is
for UAE oil. Yeah we've had talks with folks about that. So let's go on a scale of one to 10 10 being we'll see another
equivalent of AB Cake in Kuwait September 19 where Iranians forget about the Iranians target and hit the most valuable oil
infrastructure on planet Earth. In this case Saudi Arabia let's say and a zero is a nothing burger. Everything is peace and
holding hands and so forth. I think we started at as part of a tour to two or three. And with this new attack with these
missiles and drones by the whooshes into Abu Dhabi and a military base we're probably up to a three or four. They used
more advanced weapons weapons they had to have gotten from Iran. However had Iran or they really wanted to destroy important
infrastructure they could have. And they didn't. So we're not at a 10. We're not at a nine. But you know the Hutus have suffered
a setback on the ground. The UAE and the Saudis have successfully pushed them back. And so they're on their back foot
and they're retaliating. But I think we're at a four here a Manus. I don't think we're anywhere close to that. September
19 20 19 AB CAC attack. We're not we're not quite there yet. And I don't think we're going to get there. I think we're going to
go to a higher level of escalation and tensions. But I don't think Iran or the UAE and Saudi Arabia certainly want to
escalate from beyond their. We've got quite a few houses raising their forecasts. Bank of
America is looking at a hundred and twenty dollars a barrel in 2022. You had Barclays move as well. I mean I'm losing track.
We'd like somebody full time just to track like the amount of upgrades price forecasts are getting. Bob do you agree with the
view that. Okay. Sure it might. It might not last long. About 100 dollars a barrel with a breakthrough with at least
temporarily. Near-term we don't see it but you know I've been telling my
clients for years. When the market turns structurally bullish I will be the biggest bull. You know we are going to blow through
one hundred one hundred and twenty. We're going to recessionary levels. We think around 150 but not yet. We're not tight enough
yet. I think this strength is going to reverse. I think we're going to build inventories. I think we're going to see a lot of
oil come out of Saudi Arabia and the UAE this year and the US. I think there are macro risks that are going to depress prices.
And our view is that Iran were more likely to see a deal with Iran than a war with Iran. So our base case is we're headed more
towards the 80s and the 70s. Later this year you have to wait a little longer. But it's coming. The boom cycle is coming. A 150
is coming but not yet. I don't think it's fundamentally justified this year unless we have a major geopolitical
disruption. And here I would look to Iran as the biggest risk.