00:00We were speaking with our oil reporter earlier about this situation and he was noting that Venezuela is not necessarily a major player in the oil markets.
00:08But what, if any, impact could this incident have on the current oil market?
00:14Sure. So I think he's spot on. This is less than one percent. Venezuela's production is less than one percent of global production.
00:22What I think it would do is have more effect on other sanctioned supplies. For example, the Russian supplies, the Iranian supplies.
00:35There's a lot of competition among these three countries that use the same illicit tankers and financial channels.
00:43They have the same primary buyer, which is China and the like.
00:49What we've already seen with the tanker seizure from last week is that that reinforced what has been an increase in cost of tankers,
01:00especially those who will engage in shadow fleet dynamics but are not yet sanctioned.
01:07What I note also, though, is that this blockade provides a loophole for Chevron for the supplies going to the United States because they don't use sanctioned tankers.
01:23So we'll see how it plays out. I'm watching in particular also whether at the same time the U.S. is willing to tighten the screws on Venezuela and on Russia.
01:36If so, then we might see more of a market impact.
01:40But as you can tell, I'm a little bit skeptical of the Trump administration willingness to really enforce their Russian sanctions.
01:47Sure. And Rachel, just on that point, we have over the past few weeks and months still seen oil trading in this very narrow range.
01:57Would it be potentially additional sanctions on Russia that would make a significant impact or break a break outside of this this range that we're seeing here?
02:08What do you think?
02:08Yeah, I think we might need to see that or a significant increase in demand, right?
02:16Demand has been relatively sluggish this year and we've seen a lot of or we've seen enough supply increase from from non-sanctioned OPEC plus countries,
02:27right, particularly those in the Gulf taking back market share, including from some of these countries.
02:33So we could have the supply shock or or the demand shock.
02:38But, you know, the fact that we are talking about tanker seizures, tanker explosions, higher shipping costs at a time when oil prices are in the mid, you know, the mid 50s.
02:52This is a different dynamic. And that reflects the relatively ample and well-supplied markets.
02:59Also really key here, does China continue to buy and build its stockpiles when oil prices are cheap?
03:07My hunch is they will. That will provide some some floor here.
03:14And that's one of the reasons why I don't expect oil prices to go if they get below the $50 mark.
03:22I don't expect them to stay there.
03:25You don't expect. That's what I was going to ask.
03:27I mean, what would have to change if we do, in fact, see China buying more and, in fact, injecting some of that stoppage to that $50 floor that you're saying?
03:39That's right, Jennifer.
03:40I think we would have to see, you know, China, as I say, China, making different decisions.
03:52You know, if we see price, if we really see demand weakness, OPEC Plus already decided they're not going to keep adding in the first quarter.
04:04But this has been a bit of an ample, you know, an increase.
04:10That's an important dynamic.
04:14The other thing, of course, we're watching is this new supply out of the Americas, including Venezuela's neighbor, Guiana, and the resilience, in a way, of U.S. production.
04:26I do expect, as we go into next year, that the relatively low oil price environment is going to lead to some slackening of U.S. production as new investments are not occurring.
04:41Rachel, I'd love to just finish on natural gas, because you actually believe that natural gas is better supported than oil right now.
04:50I wonder if that's a short-term story, because just last week we were talking about potentially milder winter weather being a different story than what we're hearing right now.
05:01Yeah, I think that's right.
05:02And there are different time frames we're all dealing with here.
05:06Sitting here on the east coast of the U.S., I hope that it's going to be a milder winter.
05:11Because it's been a pretty cold start to it.
05:14But it's not all about me.
05:16So, look, I think right now we are seeing a dynamic where Europe, in phasing out Russian gas, is the buyer of last resort for LNG, especially U.S. LNG.
05:29And we're seeing Qatar wait and see about signing new contracts.
05:34So, I do expect 2026, with AI-related power demand, with data center demand, that will support natural gas prices, maybe not quite as strong as 2025.
05:48But then, as we go further out, past 2027, there's a lot of natural gas coming on the market.
05:57And there's a lot of countries that are saying, you know, we're not going to buy unless prices go into the high single digits or mid-single digits.
06:07So, there's going to be a bit of a price war ahead with some volatility and interesting trading dynamics ahead.
06:15So, there's going to be a bit of a price here.
Comments