00:00So OPEC plus meaning they brought back this one hundred thirty seven thousand barrels a day to the market as expected. But perhaps the hawkish surprise is the fact that they decided to hold off in the first three months of next year. What what is the rationale for that decision. What what did they provide as rationale. Well I mean I think you know you look at what what can be provided as rationale. But you also look at the context that it's all given in. And you know OPEC plus is always saying that they're they're looking at the market and they're trying to digest
00:29the demand of their customers. But I think if you take a step back from that you can sort of read the tea leaves that this is also partly to do maybe with Russia.
00:38You know Russia was sanctioned. Two sorry two of Russia's largest oil producers were sanctioned. Rosneft and Lukoil by the Trump administration.
00:46And that is raising a lot of doubts about what Russia is able to produce what they can bring to the market.
00:53And if they're unable to increase output they have for before previously pushed for for smaller or no hikes at all.
01:01So likely again at this meeting Russia's voice was was to some degree likely heard.
01:08So you could there that's the Russia argument right because they can't drastically increase and they're a big part of the OPEC plus alliance.
01:15The other aspect as well is we are getting into an oversupplied market. Now OPEC plus has been famously increasing output since since earlier this year month after month.
01:27And that's actually been absorbed by the market relatively well. Yes Brent is at sixty five dollars but we haven't seen a collapse into fifty or forty dollar range in having it sustained at that level.
01:38Part of that is due to Chinese buying. They were buying quite a bit to refill their inventories. Now those purchases might start to slow as as the year goes on and as we go into twenty twenty six.
01:49So that demand isn't really there anymore. So you could see this tapering as hey they're going to see how the market digest this last bit that they're adding through December.
01:57And then after that see where the market stands because there is a view widely that there is an oversupply coming.
02:04At the same time you also have U.S. output which has been quite strong. U.S. production has remained near record levels despite Brandon or rather WTI being at the low sixty dollar range.
02:19Yeah. And it's interesting you know last week the Iran co-CEO Amin Nasser was speaking at FII and he said that he's still seeing strong signals come through from Asia.
02:28You reference the fact that China had been building their strategic stockpiles. What are you watching out for in the coming months even to determine whether that demand has started to falter.
02:42Yeah. I mean clearly you have to look at the run rates at the refineries what what the teapots are purchasing and what their quotas are.
02:49You also have to look at industrial output from China to see how how the Chinese economy as a whole is is kind of going.
02:59Because when you look at the the strong Chinese demand yes they were filling their strategic reserves.
03:04But that isn't because of you know the enormous demand coming from from China's sector. You know it's not because there's huge amount of gasoline being guzzled or diesel being produced for trucking.
03:15The EV sales in China have been very strong. And so on a long term basis Chinese demand for for gasoline products will not continue to grow as it has in the past.
03:26Likewise for heavy trucks they've been shifting to some degree to LNG look for natural gas as well as electrification in that sector as well.
03:34So I think you need to watch just the downstream demand from China. You need to look at industrial demand overall.
03:41But that growth hasn't been where traders were expecting maybe a year or two ago when China was coming back from the post covid era.
03:50Continuously China's industrial growth and economic growth has sort of under was not living up to the hype that a lot of the traders had been expecting.
04:02And it hasn't really pushed up oil demand significantly. Now that can change. But you know when you're looking at the market it's not so much a demand situation.
04:11It's also the supply. And as I signaled you know the the U.S. supply has remained strong. OPEC plus continues adding barrels to the market.
04:18And there are others as well that are adding.
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