00:00You sounded a little bit doubtful when I spoke to you earlier.
00:03If they in fact go through with this, how long lasting will the impact be?
00:07Good morning. Great question and great place to start.
00:10So let's do the maths.
00:12The report so far is that the IEA is planning the biggest ever release
00:18and the number out there is so it would be somewhere north of 180 million barrels.
00:24What we have lost, more than 10 days of war,
00:28very easy calculation, about 20 million barrels per day
00:31that flows through the Strait of Hormuz.
00:33We are now past 10 days of the war.
00:36The market has already lost about 200 million barrels, give or take.
00:41If the IEA countries release that much of oil and a separate question
00:46over what period of time they'll be able to release all of that,
00:50that would simply make up what the market has already lost.
00:53Then every single day after that, that the war continues
00:57and the Strait remains closed, what do we do?
01:03If you take a look at how long this conflict has gone for,
01:08the impact across the Gulf states, across the flyers it is,
01:12do you do modelling in terms of how much worse it can get
01:16and what alternatives there are to being able to get around
01:20using the Strait of Hormuz?
01:23You know, this black swan event, if I can call it that,
01:28has already gone past all modelling.
01:31You can't.
01:33There's obviously the warfare with the missiles and drones
01:38and what's going on in the Strait of Hormuz, right?
01:41So on the ground and physical market disruptions,
01:45the likes of which the markets have never seen before
01:48in terms of the enormity, 20% of the oil supply simply getting cut off.
01:53But now this war has become even more complex and layered.
01:58The last few days, what I'm seeing is it's become a psychological warfare.
02:03It's become an information warfare.
02:05And just information warfare wouldn't even, you know, completely describe it
02:11because we are seeing, you know, as overnight we had the Energy Secretary in the U.S.
02:17putting out an ex-post that a tanker had been escorted safely out of the Strait of Hormuz
02:24and then retracting it.
02:25And the U.S. Press Secretary, the White House Press Secretary,
02:30then saying that that was false information.
02:33So, you know, we are absolutely in uncharted territory here.
02:39And I don't know what relief valves the IEA released.
02:43Let's see what that does.
02:44Maybe some psychological impact.
02:46But in the physical space, in the physical markets, it's absolutely chaos and mayhem.
02:53You talk about this psychological and information warfare.
02:57Say, though, if this war comes to an end tomorrow,
03:02I wonder what is your sense of the extent in which production can be brought back quickly
03:08given the damage we've already been seeing to producing infrastructure?
03:13Yes.
03:14So I think we would also need to very clearly define and agree on a definition
03:19of what an end to the war means, right?
03:22The market view has been that President Trump declares victory, the war is over.
03:31But we forget that there's two other sides in this war.
03:35There's Israel, which said, I believe, on the same day that Trump said the war is going to be over
03:40very soon.
03:41Prime Minister Netanyahu said that Israel is not finished yet.
03:44So we need to keep that in mind.
03:46What plans and strategy does Tehran have?
03:49We don't know that.
03:50So I think I would be very careful in calling in, you know, describing what is an end to the
03:57war.
03:58You would need absolute certainty for a period of time in the markets and on the ground in the Strait
04:06of Hormuz
04:07that there's going to be no more threats from drones and missiles and debris or even mines, for that matter,
04:18laid by anyone, for ships to actually start going back and forth through the Strait
04:23and for the 20 million barrels per day to start flowing into the market.
04:26So, you know, the end doesn't look as clear to my mind as, you know, one would hope it would.
04:35And at the same time, is the war worsening the problem that we've had of dark fleets?
04:42I mean, this idea that the U.S. is allowing Indian refiners to take Russian energy and sanctioning them.
04:52I mean, how does this shift the picture?
04:55That's a drop in the bucket.
04:58India could take potentially, I don't know, 10 to 20 million barrels of Russian oil that has been floating and
05:08stranded, if you will,
05:10because of sanctions of the parties involved or sanctions on the on the vessels involved.
05:16Again, let's be very clear, the U.S. has not lifted, even temporarily lifted sanctions on Russia.
05:23What it has done is given a very limited waiver for one month.
05:29India can buy oil that was already on water as of the 5th of March.
05:34So a very, very small relief valve does almost nothing to address this huge chokehold that we have in the
05:42Strait now.
05:44And, you know, where do you see the biggest vulnerabilities in economies across Asia?
05:49Where do I start?
05:51So already we see the ripple effect going through all the way into petrochemicals and every single product around us
05:58that we consume that uses petrochemicals.
06:02And, you know, every day I'm seeing at least half a dozen to even a dozen companies declaring force majeure
06:11on product supply.
06:13These are petrochemical companies.
06:14So it has already percolated all the way down to that part of the oil supply chain that, you know,
06:22is the closest to consumers.
06:25And, you know, you earlier asked me what when the war ends, I would say that this supply chain disruption
06:33has taken on such gigantic proportions now that even a complete end to the war and a complete return to
06:41normalcy,
06:42I fear would mean at least months before we return to anything resembling normalcy in oil supplies and refining, in
06:53petrochemicals and all the goods that we consume on a daily basis.
06:57So we are headed for a period of elevated oil prices that could be extended, protracted.
07:05I wonder what is your sense of how high things can go?
07:08120, I mean, based on what you're saying, maybe that's not even the lid.
07:14Well, at this point, we are in this very curious and unfortunate situation, I would say, that the prices that
07:21we are seeing on crude futures are simply completely disconnected from ground realities.
07:26If you need to and if you have to lift a physical barrel, which is where which is how the
07:31world functions, right?
07:32Not on the basis of futures, but the physical barrels, you are having to pay 20, 30, 40 dollars more
07:39than where the futures are trading.
07:40So when you ask me where will prices go, it's really hard to say.
07:45So which prices should we talk about? But but I would leave it at this, that, you know, how how
07:51much longer the Strait of Hormuz remains closed?
07:53So the IEA may provide some relief, very small temporary relief.
07:59I would say at the end of the day, the Strait of Hormuz needs to reopen or at least in
08:04the physical market, physical oil prices will remain and continue going up in triple digit territory.
08:09Just forget about what you're seeing on your screens with regard to the futures.
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