Let's start with what the OPEC plans did.
It's cutting one hundred ten thousand barrels a day.
Some say it's a small move but it is about protecting prices instead offer
the balance in the market correct. I don't know.
I think it's all ado about nothing. It's a statement that they could do
something if they need to. 100000 barrels a day does nothing.
We've seen Brent go down WTI go up. So there's been no impact on the oil
market. I don't know whether the Saudis are
happy about that or sad about that. But you know they wanted to signal that
they could do something A B B. There was nothing to do right now.
And they basically did nothing. They cut a hundred thousand a day and
nobody will see that in the marketplace. Where do you see prices going from here.
Hedge fund bats are significantly higher.
Well the hedge fund bets are kind of irrelevant at the moment.
We're not seeing much in the speculative community.
Liquidity is unbelievably low both in terms of trading liquidity and in terms
of investor liquidity and become a long term long term energy or commodity
portfolios. So we're seeing a market that's torn
between weakness. On the one hand that's driven by lower
economic growth that's driven by higher supply is driven by demand really
falling out completely from where people thought it was going to be.
But there are a lot of potential bullish factors in the market.
So that leaves leaves the market and a bit of a limbo.
We don't really know whether there's going to be a hurricane season.
We don't know whether they're going to be dislocations of supply coming out of
Iraq coming out of Nigeria coming out of Libya.
We don't know what the dislocations on the market are going to be as Europe
moves away almost completely from importing Russian crude by the end of
this year. So there are a lot of potentially
important bullish factors in the market. One day big big bearish factor looming
over the market is what's going to happen with the JCP away.
Will we know in the next week or two whether the U.S.
and Iran are coming back to an agreement reading two million plus barrels a day
increase in oil. So we've got mixed signals.
I say the bearish part of it is overwhelmingly more important at the
moment than the bullish part of it. But we don't know how it will go.
And all we need is a really happy Gulf of Mexico hurricane season that really
will turn the market tighter. Right now I just want to get I mean
you've outlined and pretty much all the major factors they're involved in.
If we could attach probabilities to that say on the Iran deal would you say on
balance that would be more important right now and then just everything else
and the tightness we're seeing pretty much everywhere else in his energy
market we're seeing tightness in the in the global power system.
There's no doubt about that. That's a combination of things are
happening before Russia Ukraine. So obviously climate change impacts
across the planet. We've had drought in the northern
hemisphere the highest temperatures on record in the northern hemisphere.
We don't have redundancy in the electricity grid.
So electricity prices are high. And in Europe there are unbelievably
high because of the geopolitics surrounding Russia Ukraine and the
Russians decision to drop Nord Stream flows to zero for however long they
planned to do that. But the oil market is looking very
different. We've had a 20 to 25 percent drop in oil
prices since June. We having more bearish factors on the
oil market than we are in the gas market or in the electricity market.
So we're we're having a big divide across the energy spectrum.
And I think one thing's for sure the world is going to see tighter
electricity markets for some time to come.
Europe can't deal without Russian gas for three or four years before there are
adequate replacements in the market. So we're going to see very high
electricity prices impacting domestic politics
in Europe and around the world. But on the oil market side it's a very
different picture. More inventory growth.
Well I'll say it was buttressed by the relatively rapid decline in global
growth the rapid decline in oil demand. I mean the U.S.
alone is down just about 2 million barrels a day this summer from where it
was a summer ago. And that's a function of high prices
impacting demand. So where we're having these two
different markets and what happens in oil is going to be a function on the
barrel side of Iran. And relatively speaking even worse
global growth. So a risk a recession in the global
markets or interruption of supply coming from disruptions in Iraq where they're
mastic politics are not working out very well at the moment in Nigeria.
In Libya again we have Russian production that could be questionable in
terms of the investable proposition in Russia.
And we really do have this drop dried man.
But the hurricane season is something to watch out for.
And it's a it's a kind of interesting phenomenon.
The U.S. is important in a way that it does right
now. As a supplier in the market.
Yeah. Excuse me.
But no no I was about to say I mean the hurricane season.
It is what it is when it comes. It comes.
And what I wanted to ask you a little bit more because I mean Europe seems to
be in very big trouble. You're getting
I mean for obvious reasons politicians coming in.
Liz Truss. She has her plan.
European energy ministers are meeting later this week.
What's the best case scenario you think in Europe for European consumers
struggling with these prices. The best case for consumers at the
moment is really sad to say is is pulling back on consumption conserving.
They're doing it because high prices tend to do that.
But there's no way that there can be a replacement of the lost Russian gas in
Europe without there being a phenomenal drop in demand from one factor or
another. It's going to be on the growth side.
We're seeing a drop in demand in energy intensive industries.
These industries in smelting has gone to zero in Europe.
Aluminum production has gone down by about 70 percent.
Yellow is down. So we're seeing a very big impact on the
European economy in the energy intensive industries that can't do without.
Without that gas. And the consumer you know might have
some rebellion at that at the political level which is a worrisome sign to look
at for the next three months. And we had that John Kerry saying that
Russia's weaponized fuel when it shut down that you know not stream pipeline
might oil be the next commodity to be weaponized.
And what impact would that have.
Oil is being weaponized. So we have to remember that it's a two
way street. It's that only being weaponized on the
Russian side but it's being weaponized by the Europeans.
It's being recognized weaponized by the West.
You know the very idea that the G7 have of putting a price cap on oil is a
weaponization of energy as an instrument of policy.
Can they do this. This is going to be a very severe test.
The sanctions imposed on Russia in terms of everything related to the oil sector
imports for supplies exports that are being
embargoed by Europe or the United States by Canada by Japan.
You know this this is a weaponization that's that's happening and it's
happening on both sides. It's not a one way street.