00:00Actually, let me just start off by asking you about the latest, you know, with with Ukraine, Russia and how much downside risk you think that could pose if we do get a breakthrough in the coming weeks.
00:10Great. So our base case is a status quo from a sanctions perspective.
00:15And under our base case where you have a status quo, Russian oil production continues its downward downward trend.
00:23In our base case, oil prices next year for Brent will average $56 per barrel, so roughly 10 percent of downside.
00:29Yeah. However, if we were to see a peace deal, a potential lifting in U.S. sanctions, we estimate roughly $5 per barrel of downside to our already below the forecast below the forwards forecast.
00:43So that would put Brent in 2026 probably in the in the low 50s downside because Russian production may not decline.
00:52And second, we have seen very significant increases in Russian oil and water that may normalize, that may moderate.
00:59More inventories on land. And so an additional source of potential downside pressure.
01:04Yeah. OK, so let's go back to your forecast for next year. You are forecasting Brent and WTI to average respectively over the course of 2026, $56 and $52.
01:14Those both below the forwards. What what is the rationale here? Is it simply just a mismatch between supply and demand?
01:22Exactly. Exactly. Yeah. So how much oversupply do you see? So we think that next year the global oil market will be in a surplus of two million barrels per day, two million barrels per day, more supply than demand.
01:33The main reason for that forecast is that we think the oil market is right now already in a surplus. If you just add up all the oil inventory barrels that we can track across the world, we have been close to building by nearly two million barrels per day already over the last three months.
01:49So we're not calling for a sequential easing in the surplus. We're basically calling for a continuation of the very supply driven strength.
02:00So you see a surplus of around two million already in this market right now.
02:05If you just look at the last 90 days and if you just add up all the inventories that are that are building, you're close to two million barrels per day with most of it increases on water, though.
02:15And to see the next leg lower in oil prices, I think a greater share of those builds need to happen in the pricing centers on land.
02:23And one reason why on water has built so much is pressure from sanctions, especially from Russia, but also Iran.
02:29China stockpiling has been a big theme throughout the course of this year. And I think that took people by surprise. Is that no longer a tailwind going into 2026?
02:40So we saw a very rapid pace of stockpiling over the summer. We have seen a moderation over the last few few months. I think it's partly partly seasonal.
02:49We assume an additional acceleration in Chinese stockpiling. We assume Chinese inventories will will rise by about 400 KBD in 2026.
03:00That's absorbing about 20 percent of the global builds that we that we expect. We think it makes sense to look for an acceleration because China stockpiling tends to be price sensitive and we forecast lower prices.
03:11Second, because Beijing is focused on energy security. And third, China has a lot of room to store extra extra oil.
03:17Okay. So one thing that I've noticed about your forecast is your short term, quite bearish, but then more medium term, you're forecasting $80 Brent from late 2028.
03:28Why are you seeing the uptick in a couple of years time?
03:30Yeah. So the short story is that in 25 and 26, we think we're going through a big supply wave. Yeah. But later this decade, we see just much fewer supply growth projects at the horizon.
03:44We expect oil demand to grow through 2040. And so it's this combination of strong above consensus demand growth and a moderation in what has been exceptionally strong supply growth.
03:55That leads us to forecast that oil prices will need to rise to incentivize investment. We have seen relatively low investment in oil projects over the last 15 years.
04:06And I think if we had not seen the amazing U.S. shale productivity boom, oil prices would have been significantly higher.
04:11Yeah. What do you see happening with U.S. shale production in light of that? Because you mentioned that as prices continue to drift lower, you're probably going to see less of an incentive to continue with the pace of supply growth that we've had the last year or so.
04:25How does that affect U.S. production outlook in the coming years?
04:28Yeah. So our base case is that oil market is a large surplus in 26, but then rebalances in 27 because low prices are expected to take their toll on non-OPEC supply in 27, especially in the U.S., where total liquids production has been up an unbelievable one million barrels per day year over year, despite low and falling prices.
04:49We expect roughly flat U.S. shale supply under our forecast where prices come down further. And that will help to rebalance the market in our base.
04:57Yeah. OK. Another commodity we've been watching super closely is gold. Obviously, with everything that's happened this year, it's had a stunning 2025.
05:06Do you expect that to be replicated in 2026? Are you still bullish gold here?
05:10Yes. We look for nearly 20 percent of additional price upside by the end of 26, with our forecast at $4,900 per troy ounce by the end of 26.
05:20Not as fast as this year. We're up almost 60 percent year to date. But the two drivers of the 25 rally we think will be repeated in 26.
05:31Number one, structurally higher central bank purchases since the freezing of Russia's central bank reserves in 2022.
05:38EM reserve managers got this big wake-up call that they need to diversify into gold, which is the only truly safe asset once you hold it in your domestic vault.
05:45And second, Fed cuts. Fed cuts, because gold is a non-yielding asset, tend to attract inflows into the gold ETF market.
05:54And with our economists forecast that you see 75 basis points more of Fed cuts, we get support both from central bank buying and from private investors accumulating gold.
06:03It's not long ago that people were talking about the great debasement trade that was going through, that investors were reallocating away from the USD into other safe havens.
06:12A lot of that money found its way to gold. The dollar has been supported in the last month. It's actually regaining ground again.
06:19How does that impact that thesis, that part of the market?
06:21So I would think of a potential broadening in this diversification team, which currently is quite restricted to central banks.
06:29But if that were to broaden to private sector investors, it would cause further upside to already bullish gold price forecast.
06:37I think the key intuition for the size of this price upside from private sector diversification is that the gold market is relatively small.
06:44If you look at global gold ETFs, they are about 70 times smaller than the value of the U.S. strategy market.
06:51So you only need a relatively small diversification step out of, for instance, global bond markets to cause significant upside to the gold price.
07:00So it's another reason why gold is our favorite long commodity recommendation.
07:04You have significant upside in the base case and in scenarios where markets may perform less well,
07:10perhaps concerns about the fiscal trajectory or concerns about questions about Fed independence.
07:16I think gold would be even better than in the already attractive base case.
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