00:00Carol, I'm guessing that traders are really on high alert going into this weekend.
00:04How much geopolitical premium do you think is priced into where oil is trading, Brent, at around $72 here?
00:11Well, if I strip the geopolitics aside and I look at market fundamentals, I did not see many significant changes.
00:19So, yes, we saw some disruption in Central Asia from Kazakhstan, but that was short-lived.
00:23We saw a seasonal disruption in North America with the cold weather.
00:27But apart from that, nothing major has happened on the market fundamentals.
00:31The only thing that has happened in oil markets and globally is geopolitics.
00:36What is happening today in the Middle East we have not seen in decades since the invasion of Iraq.
00:41The buildup of military presence from the Americans in the Middle East is something quite worrying.
00:47And that by itself is keeping everyone on alert, nervously watching what could happen and allocating all sorts of probabilities
00:54to different scenarios.
00:56But so far from what I have seen, I think the highest probability today is being allocated to a military
01:01action on Iran with significant consequences on oil markets.
01:05So that's what is translating into these additional dollars that we saw being added to oil prices in a very
01:12short period of time.
01:13And we haven't seen the end of it yet.
01:17Yeah, but Karol, for many jurisdictions around the world, Iranian oil is sanctioned.
01:22So I just wonder what the actual knock-on effects would be if you see a complete removal of Iranian
01:29exports.
01:30What does that actually mean for the impact it could have on oil markets?
01:35I don't underestimate Iranian exports because there are still substantial few hundred thousand barrels a day, depending on me.
01:41Some say 500, some say a little bit more.
01:44But I don't think that what is causing the fear in the market today is the loss of Iranian barrels
01:50that can be easily compensated for.
01:52The serious risk today that people are concerned about is the impact on oil and gas LNG trade going through
01:59the state of hormones.
02:00This is, for me, is a real risk factor here, the trade for oil and gas.
02:04You have almost 25 percent of oil trade, global oil trade going through that state, 20 percent of global LNG
02:11also going through that trade.
02:13And also not only the trade, what if Iran, let's say, in one of the many scenarios, what if Iran
02:19is attacked and retaliates by attacking the infrastructure of its neighboring countries in the region?
02:25You are talking about Saudi Arabia, you're talking about the UAE, you're talking about Kuwait, you're talking about really major
02:30producers.
02:31This is where I would say is the worst case scenario.
02:34And that's why we are watching nervously about how the situation will unfold and what scenario is going to result
02:40in case there is military action.
02:41So it's not really the loss of Iranian barrels that is worrying us.
02:46Yeah. OK, fair, fair point there.
02:48But at the same time, we have been talking for months about the massive oil surplus that's that's hitting the
02:57market in 2026.
02:58Should that not be enough to absorb any of the geopolitical shock that could emanate out of the region?
03:06It depends on how bad the situation is going to unfold, because it's just going to be let's assume it's
03:12going to be a military action.
03:14Right. So if it's going to be a targeted short lift, as we saw, for example, last year, that will
03:19have a very minor impact.
03:20You might see a spike in prices only for them to be readjusted.
03:24But in the worst case scenario where trade from the Strait of Hummus is disrupted, where infrastructure, energy infrastructure is
03:31attacked, as we saw, for example, in 2019, then that surplus might well turn into a deficit.
03:38Of course, it's not going to be long lasting because the market is much more comfortable.
03:43I have not seen very high expectations for oil prices, as we saw, for example, in 2022, where even some
03:51were talking about $200 or $300 oil price.
03:54That is unlikely to be the case today.
03:56But if we have the escalation of the situation in the Strait of Hummus, then we could see that surplus
04:02turning into a deficit and putting upward pressure on prices.
04:07Okay. One thing I also want to ask you about, and I read about this in a report that Goldman
04:12Sachs put out this week, they've noted the huge rise in Russian, Iranian and Venezuelan crude on water.
04:20But at the same time, they've also noted that as it pertains to OECD stockpiles, levels are still pretty low.
04:27We're not seeing that massive inventory buildup yet on land.
04:31Why is that the case?
04:33Because you do have the sanctioned barrels, first of all, the sanctions on Russia and elsewhere, the enforcement of sanctions
04:39is being tightened.
04:40We saw how the dark fleets, several ships have been attacked in water.
04:45And we see also some conventional buyers of those sanctions, or primarily the Indians, moving away from maintaining their purchases,
04:55even if it's temporary.
04:56So we're seeing on the buyer's side, there is less appetite for taking the risk to buying those sanctions oil.
05:03And that's why you're seeing this kind of buildup happening.
05:05You're not finding a market easily for those barrels.
05:08But given the history of oil markets and what we have seen over the years, sanctions barrels will always find
05:15a buyer at some point.
05:17Maybe today we have a dip in the demand and the appetite, but I think it's a question of time
05:21before it finds a home.
05:24You know, we can always evade sanctions.
05:26But at the moment, the situation calls for a more cautious approach on the buyer's side.
05:32We're definitely seeing the Indians being much more careful.
05:35The Chinese are still maintaining their purchases, though they are facing a bit of a pressure from Venezuela because of
05:40the growing American influence there.
Comments