00:00It seems like the volatility keeps carrying on. What do you make of the current backdrop and what
00:04are you watching? So I think the thing I'm watching right now is are three things. First,
00:09we did see the Houthis enter the conflict on Friday. And this is something that's important
00:14in terms of when we think about the flows that have been directed away from the Strait of Hormuz,
00:21they are flowing through a pipeline that lands them kind of in the Red Sea. Previously,
00:27the Houthis have been able to target the Red Sea and restrict flows. This happened in 23 and 24.
00:32So if the Houthis escalate in this conflict, they have a meaningful ability to actually kind of
00:40put more pressure on the market. They will move from a chokehold in the Hormuz to kind of a strangle
00:47hold where even the flows that we're able to reroute now cannot escape. So I'm watching that
00:52as a key kind of variable for the market. This hasn't happened yet. But the fact that they are
00:57starting to engage is something I think is critical. Obviously, the rhetoric that we saw this morning
01:02from the U.S. administration about negotiations on one hand, but potentially targeting energy
01:10infrastructure should they fall through, I think was a catalyst for some volatility today. So I think
01:17those are the two critical things. And then the last critical thing is just looking at the barrels.
01:22How many barrels have been impacted so far? The number goes up every day. We're looking at 300
01:27million barrels so far in this conflict that have been impacted. We had some levers in place,
01:33some buffers. Those are starting to get exhausted. So each day that goes on, you just got to keep kind
01:38of counting those barrels and figuring out how low inventories are going to go by the time the Hormuz
01:43is reopened. But Rebecca, with that in mind, I would have expected oil to be up more today. And this
01:49morning when we saw President Trump posting trying to talk down the market, we actually saw a trade in
01:54the red briefly. Are you surprised by today's action? So I think we have been pounded by a barrage of
02:02headlines. And I think traders are getting used to the idea that maybe you can't chase every headline.
02:07So I'm not surprised that we're not up more because we have this back and forth. We take one
02:13step forward. We take five steps back in the rhetoric. Again, I think there's more focus on
02:19the barrels. And one place where we have seen a little bit of respite is an increase of barrels
02:25through the Strait of Hormuz as Iran has started charging some vessels to go through. So maybe that's
02:32offered a little bit of a release valve. So I'm not terribly surprised that we're not up more.
02:39And I'm not I wasn't surprised to see us down a little bit. It's the type of situation where
02:44traders have been so whipsawed that, you know, taking the bait on every single headline doesn't
02:50necessarily work. Looking at the barrels, looking at the actions as opposed to the words has been a
02:56little bit more productive. Well, I'm curious to hear your thoughts on a conversation we had with
03:01Amos Hochstein on Friday on the close, a former advisor to President Biden. And he made the point
03:07that you take a look at energy markets right now. They're pricing in risk, but they're not pricing in
03:12disruption. And in his view, that was a mistake. And I'd love to hear your perspective on that.
03:17You know, what is this market pricing in? And should we be thinking about worst case scenarios?
03:23OK, that is a great question, Katie. And let's start with this, that it depends where you are
03:28geographically if that statement is true. If you're sitting in Asia right now and you are buying
03:32physical barrels from Omanu, Dubai, you are already paying $150 a barrel. So there is the risk because
03:40you have supply scarcity. If you're sitting here in the U.S. and you're looking at WTI, which is above
03:45100, you have to think about how we came into this conflict. This might not be the wrong pricing of
03:51risk. It might be that we had a good set of buffers coming in. We were anticipating oversupply in
03:57this market of two and a half million barrels a day. We had high inventories. We've had the luxury
04:02of the SPR being here. We had floating storage at kind of record levels from Russia and Iran. So
04:10there were a lot of little pieces in place that helped insulate, let's call it, Western markets
04:18that Eastern markets didn't have. And I hate to use this example, but if you think of like COVID,
04:23it started in Asia and we kind of watched it from over here and said, that doesn't look good.
04:28And it kind of migrated and hit here. And that's kind of like how the price movement is going to
04:33come through really high prices in Asia. And they'll filter through to here over time as Asian markets try
04:40to suck out all the barrels they can out of the Atlantic Basin and then come for the barrels in
04:45the U.S.
04:46Well, that's actually exactly where I wanted to go, Rebecca, whether or not, you know, the fact that we are
04:50seeing one hundred fifty dollars per barrel in Asia, whether that's a leading indicator for what we're
04:55seeing on WTI. And if you do think of it that way, I mean, what is the typical time lag?
05:02I mean, when might
05:03you expect to see, you know, WTI bump up maybe not quite one fifty, but starting to get towards that
05:11trajectory. So you know that it's time, right? So I think if the market can start seeing barrels moving
05:18significantly through through Hormuz by the end of April, we don't see one fifty NTI. We have enough buffers
05:25in place. There's enough rerouting that's happening, assuming the Houthis do not start to target the Red
05:30Sea. I don't I think the market has priced in this window to the end of April of seeing the
05:35barrel start to
05:36move where we won't see that kind of convergence higher. We would see the convergence maybe lower
05:42with Asia gravitating towards Brent or TI eventually. So the longer this goes on, the more likely we
05:50converge higher to the Asian markets. If it can be nipped in the bud, they will converge lower to Brent
05:56and TI. So if we can't get through this and we don't see flows starting to really pick up at
06:01the end of
06:01April. I think that's when you start to see the reacceleration to some some higher higher prices.
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