00:00I know it's difficult to react to that sort of news, but in terms of these reports that we get that there might be a strike on Iranian nuclear facilities at the same time, Iran itself isn't even sure if sanctions are going to be tightened or loosened around supply.
00:14How confident can you be in making price forecasts around oil at the moment?
00:19Yeah, I think that's why we have to consider scenarios. And when it comes to these types of risks, we like to bring it down to potential disruption of supply.
00:32In the case of Iran, Iran has increased its supply by just about a million barrels a day over the past couple of years.
00:39And if you remove a million barrels a day of production from Iran, this could represent an upside of about $8 a barrel to the crude oil price.
00:48Now, that said, we know that the rest of OPEC has a lot of spare capacity.
00:54So if we think that even in the case of a disruption of supply, that would ultimately be offset by an increase in supply from the rest of OPEC, then that impact on price tends to be moderated over time.
01:11And can we also consider the potential factor of U.S. supply and demand as well?
01:16I mean, obviously, President Trump is on the record saying he wants low oil prices, but he also wants strong U.S. oil domestic production.
01:24Is it possible to have both?
01:28So when we talk to U.S. oil and gas producers, they react to market prices more than anything else.
01:36And yes, if you have WTI prices below $60 a barrel, this is a big deal for producers.
01:44And it's not just me saying we just have to look at the rate count in in the U.S.
01:51And oil drilling has come off significantly since the year has started.
01:58I mean, another factor for the reason for these weak prices we're seeing are concerns around demand in China.
02:05And it's not just demand for oil.
02:07I'd be interested in your views on Chinese LNG demand as well.
02:11Longer term, can you see it picking up?
02:13What's your outlook for perhaps not this year, but for the coming years, maybe even the coming decade?
02:19Yeah, that's a very good point.
02:20Year to date, China demand for LNG has been exceptionally low, even comparable to the lockdown year of 22.
02:30So I think there were a few different factors contributing to that.
02:34It was a very mild winter.
02:37It was also a period when China was getting a lot more pipeline natural gas flows coming from Russia.
02:45So the more pipeline gas you get, the less LNG you need to purchase.
02:49Also, the other aspect of the market that we notice is that power generation growth is growing at a lower pace than last year.
02:59So all of these factors have contributed to a little bit of weakness in demand of natural gas.
03:05That said, when we look at what drives that demand in the first place, it is primarily industrial activity.
03:14So to the extent that the U.S.-China tariff de-escalation can support industrial activity for manufacturing and exports,
03:23this can support LNG demand sequentially through the end of the year.
03:27And to your point, when we look longer term, China is still a market where we expect to see significant growth in power generation.
03:38So even though China does not rely on natural gas as its primary source of power generation, it is a complementary fuel.
03:46So we definitely expect natural gas demand to continue to grow in the region for many years to come.
03:52So we're going to look at the end of the year.
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