00:00Jeff Curry of Carlyle writing this, the cost of rebuilding and recovering from the Hormuz shock will be enormous and
00:06underscores the regime change towards physical assets.
00:09Jeff joins us now for more. Jeff, welcome to the program. It's always good to catch up with you, sir.
00:13Fluid environment, so allow me to go through the headline of the last five or ten minutes or so.
00:17One headline, one report coming from Iran that their energy assets have been struck.
00:21Now, I have limited information beyond that. But, Jeff, from your standpoint, in the week since we last spoke, has
00:28this got worse or better?
00:31Worse. I like to call it molecular contagion. You know, last week we were talking about shortages in Singapore.
00:38You know, spices of jet fuel spiked to two hundred and thirty dollars a barrel this week.
00:42It's in Rotterdam. Rotterdam's two hundred and twenty dollars a barrel. Thailand, Philippines, New Zealand, Australia.
00:48So this thing's going intercontinental. And then, you know, so you look at Singapore, Rotterdam, the spread.
00:54There's no more price spread. There's no more spare barrels. There's no policy fix. And it's just physics at this
00:59point.
01:00I want to emphasize these are physical supply chains. And the idea of around financialization and the ability to print
01:07money doesn't apply here.
01:09And I think the title of that piece says it all. You can't print molecules.
01:12Jeff, with that in mind, where and how do you think we're underpricing this risk still in financial markets?
01:19That's the peculiar thing about this is that you look at the paper markets.
01:23They've entirely disconnected from the physical markets.
01:27Crude oil on an Oman basis, you know, on the other side of the strait, the side that's free, spiked
01:33to one hundred and seventy three dollars a barrel yesterday.
01:35Crude delivered in Asia is a blend of Dubai and Oman, which is trading somewhere around one thirty and one
01:43seventy.
01:44Today, this morning, they're one call it one twenty to one fifty.
01:47So you're delivering crude into Asia. It's somewhere around one hundred and thirty dollars a barrel.
01:52Product prices are spiraling above two hundred dollars a barrel.
01:56So the disconnect is between the paper market, which is sitting around one hundred and the physical market, which is
02:03showing a very different environment.
02:05Jeff, some people have speculated that's because of certain types of manipulation in the futures market.
02:10And that's the reason why you have seen this gap blow out. Do you think there's credence to that?
02:14You know, you could argue that Monday last week, you know, there was a mysterious 11 million barrel seller.
02:21I don't want to get into that. It's not enough to really change the dynamic.
02:24I think that the bigger factor that was likely driving WTI and Brent and staying lower is the price of
02:31Urals.
02:32Russian crude oil. It's rallied sixty five, seventy dollars a barrel once they took off the sanction.
02:37So WTI and Brent were the high cost barrels. The Russian was the cheap.
02:41What happened? You closed that gap. And now that you've closed that gap, you don't have any more spare barrels
02:45in the system.
02:46And this rest of the complex likely to start to rally.
02:49You know, I go back to the point that John started with is, you know, we're dealing with an enormous
02:54supply shock.
02:55By the way, the supply shock is almost equal to the demand shock during covid.
02:59And we know what that did to global supply chains.
03:02So I think you're at one hundred dollars a barrel.
03:04This thing's mispriced. This thing against the physical market.
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