Al Gaaod: Less Bullish but Agree With OPEC Outlook

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00:00Let's just talk about this latest report from the IEA.

00:04Are you surprised that we're getting a bit of a more bullish tone from the agency?

00:11I think just to start out, you know, as a macro shop at TS Lombard,

00:15our bias is to really look at underlying demand drivers in the economy.

00:19But we do have some expertise in oil producing countries,

00:22so we can look at supply side drivers as well.

00:25So we've always focused on demand,

00:27and that's been one of the reasons why we've had somewhat of a bullish view

00:31on oil markets for the past couple of months,

00:34even though it's been a little bit tumultuous from a geopolitical perspective.

00:38We have seen a bit of a price swing here and there,

00:41but really and truly we think demand will be somewhat robust,

00:45according to and similar in line to what OPEC said in a couple of its reports,

00:50especially in September and October.

00:52So I think for the IEA, you know, there's been a lot of talk of a supply glut

00:56but that's sort of taken a bit of a back foot.

01:00And then this sort of increased demand and bullish demand view

01:03doesn't come too much as a surprise.

01:05It might come as a surprise in terms of the timing of the report.

01:09Obviously, I would have expected this to maybe come last month,

01:12but the data now, I think,

01:14suggests that there should be some demand growth on energy markets next year.

01:18Does the demand growth stem primarily from China?

01:23Where are you seeing that?

01:27Yeah, so if I was to mention, you know,

01:29our China economist Rory Green and our EU economist Davide Onelia,

01:34we've got a bit of a bullish sort of view on European growth next year.

01:38We do see the German policy action and fiscal stimulus starting to show up

01:43and become visible in Q1 2026 and a similar type of story on the Chinese front.

01:50You know, we feel like there's a lot of dry powder in terms of stimulus there

01:53and that should be coming in post-Lunar New Year.

01:55And, you know, we're a little bit more bullish on that demand front

01:59and that just creates more demand for energy markets and oil.

02:03Hamza, where does geopolitics, though, factor into this?

02:06And I focus in on some of the sanctions that we've been seeing more recently with Russia.

02:12Is that still at play when we talk about the narrative

02:14around some of the dynamics in oil?

02:18Absolutely.

02:19And, look, I think one of the main aspects of the recent sanctions

02:23that differed to previous sanctions is that, quote-unquote,

02:26Trump has finally taken complete action against Russia

02:29in the sense that sanctioning the two oil majors,

02:33Rosneft and Luke oil,

02:35has had a bit more of an effect versus the tanker sanctioning,

02:40which we've seen, you know, sort of play out over the past few years.

02:43Now, the argument on sanctioning has always been

02:46that there will always be workarounds

02:47and you'll always find a way to work around it.

02:49But this time around, it seems a little bit more effective

02:53and a little bit more sticky.

02:55Going back to your question about, you know, geopolitical effects,

02:59I think that's mainly on the supply side.

03:02What we're seeing on the demand side

03:03is obviously the continued change in sentiment

03:06on the U.S.-China escalation when it comes to the trade war.

03:10Although we're in a good spot right now,

03:12there's always, you know, a tail risk of that going back negative

03:16and we've seen the knee-jerk reaction oil prices

03:18have had in response to that sentiment.

03:21So that's something to keep an eye out on for sure.

03:24And there's also, we just had a chart up about OPEC, right?

03:28And what potentially we get from OPEC.

03:30Could that potentially provide even more clarity

03:34in one sort of direction or another?

03:38Yeah, I think OPEC are probably going to maintain

03:41their continued bullish stance, you know,

03:43especially if you look at their previous reports.

03:45They've had quite a bit, I think it was around

03:48about 1.3 million barrels per day growth in oil demand

03:52versus the IEA's last report back in October

03:55was 700,000 barrels per day.

03:57So I think OPEC will probably continue to be bullish.

04:00They've also, they're also probably going to, you know,

04:03look at the slowdown in the winter period for oil markets.

04:07Part of the reason why we think they quote-unquote blinked

04:09on some of those, on some of the supply cuts being unwound.

04:13So I think OPEC will probably continue to be bullish.

04:16And they've got a little bit more of a bullish demand forecast

04:19than we do.

04:20So that kind of falls in line with our views,

04:23but I think they will maintain course,

04:26especially when it comes to that difference with IEA.

04:30Hamza, let's just finish on prices,

04:32because right now we're looking at Brent is down

04:34just about four-tenths of a percent there.

04:36What is your expectation then now for what we see?

04:41Do we see continued downward pressure?

04:43I think the only way we see continued downward pressures

04:48is if we get more negative geopolitical news.

04:52So if something were to happen in terms of the U.S.-China trade deal,

04:57we keep feeling like it's getting to the finish line,

04:59but it's not there yet.

05:01You know, in terms of geopolitical factors,

05:05the Middle East isn't, you know, it's gone quiet now,

05:07so that's been priced out.

05:09It's mainly going to be what's going to affect supply,

05:12so any additional sanctions, maybe additional sanctioning on Iran

05:15after what we saw happen with the international nuclear agency.

05:20So keep all of those factors in mind.

05:23From a technical perspective, especially supply side,

05:26I think the supply glut story is sort of taking a back foot now.

05:31So in terms of prices, we could see continued downward pressure,

05:34but Chinese crude port inventory,

05:37although an opaque measure, has gone down.

05:38Same thing with the Bloomberg index on global floating crude.

05:43So, you know, both of those going down is a bit more of a bullish sign.

05:47So there could be some downward pressure,

05:49but we feel like we've kind of gone to an equilibrium.

05:51So

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