00:00This mutant reaction in the oil market, it has to do with that glut, doesn't it?
00:07I wouldn't say it has to do with glut, but the fact that Venezuela didn't have a significant role in the market already.
00:14The production was not significant and was not supplied into the international markets.
00:20It was going into the black market, mostly to China.
00:23So I would say, yes, the market is well supplied, but nothing to do with glut, because there hasn't been any interruption of Venezuelan supply, attack on infrastructure or any perception or any expectations of Venezuelan supply interruption.
00:44We know that Trump is keen to get Venezuelan oil to flow again.
00:49What will that take?
00:50Well, this has multiple layers, if you look at it.
00:56One is that the current production and export of Venezuela, since the sanctions, Iran, Russia and China were mostly working on the logistics of sending this oil into the black market and ultimately to China.
01:14The first cargo of Venezuelan oil that left Venezuela after the sanctions was in Iranian vessel.
01:21And also they were exporting condensate to Venezuela to dilute some of this heavy oil.
01:26And also they increased the refinery capacity.
01:31So the first and immediate flow or impact of U.S.
01:38The recent event could be that removal of sanctions and the fact that Venezuelan oil could be supplied in the, let's say, clear, normal markets.
01:48And then we're talking about that with the oil flow and oil capacity and production increase.
01:55And that's obviously a different story.
01:57There are there has been in the past two days a lot of speculations and a lot of estimates.
02:03But on average, what is an expectation is that it might take maybe, let's say, a year for additional few hundred, five hundred thousand barrels or closer to million.
02:13This is actually what happened in regard to Iran.
02:17But that's in the case that most of the international companies, the American and Europeans, already are incentivized to invest and pump out more oil in anticipation for, let's say, regaining their debt that Venezuela has to them.
02:33So if they would make more profit, get some of that debt back, there is incentive to pump more.
02:38But majority of that, we are looking at medium term.
02:41There are expectations of at least a need of 10 million, 10 billion dollar of investment on annual basis for another three to six years, even some estimates for seven years to restore a Venezuelan capacity to what it used to be.
02:58And this is just from brownfields, no discussion of greenfield.
03:01But all of that, all of that, all of that, it's just depends on if there is a stable government and regulations, sanctions being unwind and companies feel safe and also incentivized to invest.
03:15It does seem like Trump is keen to have a tighter control of the oil flows in Venezuela.
03:22Will tighter control mean that, you know, he could help reshape the trade patterns in the Americas?
03:28And that's obviously very important.
03:33If you look at it again, like why this happened now, it's Venezuela is in U.S.
03:40backyard and two countries which are considered as U.S.
03:45adversaries, China, Russia and Iran are very closely integrated to countries, energy industry, defense and also narcotics.
03:52So if you look at it closely, it was very important for U.S.
03:56national security what has happened.
03:59But specifically about the oil flow, as I mentioned, as Venezuela has been turned into a logistical hub for circumventing U.S.
04:08sanctions against against both Iranian oil and also to a large extent Russian oil.
04:14So the recent event would, at least before any regulations have been set, would reduce these activities of sanctions circumventions by Russia and Iran in this region.
04:26So, yes, as I mentioned, there are multi layers of control over the Venezuelan oil export flow and also production.
04:36And Sarah, speaking of China, I'm just wondering, could China's demand for oil help defend oil prices?
04:43Well, speaking of demand and Chinese demand, what we have seen in the past year is that China's demand has been stronger, more resilient than everybody expected.
04:58And China has been storing a lot of oil, which obviously contributed to its demand.
05:04But something that here I like to add, and it's very important because there have been so many discussions over oil in the past couple of days and everybody tying these events to oil and oil reserves in Venezuela.
05:18Something that I like to refresh everybody's memory is that it was back in 2023 that Saudi energy minister, the largest oil producing country, said that energy security is not anymore about oil, but critical minerals.
05:32And this is very much important and critical for President Trump's administration.
05:37Critical minerals is no longer even a commodity that is important for energy security, but economic security and also is a very strategic asset for defense.
05:47And if you go back to the history, now it feels like once upon a time that the U.S. has started to creating those strategic petroleum reserves to have enough fuel reserved for the time of defending the country for its jets.
06:03And now that has been replaced by critical minerals.
06:07U.S. cannot be dependent on China for all the minerals it needs for its economic security, for its defense and energy security.
06:15So we see that many people, and you just mentioned that this came at a shocking time.
06:21It was just not too long ago, right last year, that China threatened the U.S. to put a ban on export of rare earth materials and minerals to United States.
06:32And we see that it was not only taking discounted oil from Venezuela, but China started having activities in mines in Venezuela, starting extracting and import, taking through different channels, different countries in the neighboring countries of Venezuela.
06:52So it's not, and we discussed about the short term and immediate importance of these events that United States, we see that how I mentioned for narcotics, for having three adversaries in one target for United States, Iran, Venezuela, and Iran, Russia, and China, turning Venezuela into a hub for circumventing sanctions, defense activities, narcotics against United States,
07:21right in the United States, right in U.S. neighborhoods.
07:23But if you look at the long term horizon, I know that there has been a lot of discussions about the assets and reserves of Venezuela in terms of oil.
07:32But we should also look into Chinese activity into all these minerals mine and the importance of all of that.
07:39There is a long list of minerals that may be for the, I know that we have a limited time, but if people go and look at it from gold to all those minerals that are very important for U.S. national security, we're in the mines that China was extracting them.
07:55When it comes to oil prices, given the backdrop we are in today, which is likely to persist, how do you see oil prices moving for the rest of the year?
08:05Well, there are a lot of speculations and uncertainties, but we have discussed this many times in your program that among all the commodities, oil has been the one with the minimum fluctuations and volatility.
08:23And that goes to the credit goes to the OPEC decisions.
08:29OPEC, since particularly COVID time, has been a very important factor in a market to stabilize the market and prices.
08:37And it feels like the market somehow is comfortable and convenient that OPEC would adjust its production based on market needs.
08:45And so far, this has been the case.
08:47If you look at it today, amid all these events and speculations over Venezuelan oil production, OPEC meeting, OPEC plus meeting only took 10 minutes, which I would say this has been a signal to the market and assurance that in the short term, in the coming quarter or the next Venezuelan issue is not going to be an important factor for the market.
09:12But again, OPEC's responsible and proactive strategy has created that calm and little volatility in compared to other commodities.
09:24And even in different energy commodities, oil had the minimum volatility, if you look at it, let's say, in 2025.
09:33And that goes back to the OPEC market management.
09:35So it's most of the expectation.
09:39It could be around the same range if we don't have any unexpected factor in the market that could create either a supply shock or a demand shock.
09:48But otherwise, as we see, even the geopolitical factors have not had any huge impact on the market because, again, as was mentioned, energy security is not necessary about oil anymore.
09:59There are lots of different suppliers in the market, different routes and looking at algorithms and all the all the facilities and methodologies that now we have the satellites to track all the storages, real time ships.
10:20It's it's been more rational and less prone to radical movements.
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