00:00Let's get insights on the war's impact on energy markets with Lynn Yeh,
00:04Vice President of Commodity Markets and Oil at Ricehead Energy.
00:07She has more than a decade of experience in crude and refined oil market research.
00:12Lynn, good to have you with us.
00:13Your thoughts on what Trump said today about not needing Middle Eastern oil?
00:18That is nonsense.
00:20I have to say that the world relies on the oil flows through the Strait of Hormuz.
00:26We definitely need all the barrels, especially Asia.
00:30And this is what we are seeing right now, that Asia is bearing the brunt of the disruptions.
00:34To be fair, though, the U.S. does have plenty of oil.
00:38Yeah, U.S. is the biggest exporter of crude oil for sure.
00:42But then, you know, a lot of Asian refineries are designed to process Middle Eastern crude oil
00:47because, you know, the quality of the crude oil from the Gulf producers are the medium sour,
00:53which, you know, we think the supply is so reliable.
00:57So many refiners in China, in India, are built to process these kind of quality crude oil.
01:04So there's still lots of risks about supplies and capacity.
01:08Oil prices currently at about $105, $106 a barrel.
01:12Is that reflecting enough, these challenges?
01:15Yeah, that's a very good question because I heard a lot from even the market players
01:20that they think the market is underestimating the prices of the oil.
01:24So, yeah, I have to say there is a reason for that because we have a lot of buffers in
01:30the system.
01:30So if I can explain a little bit.
01:33So there's a long value chain in the oil industry.
01:37So from the production of crude oil and then it got processed in the refineries
01:42and then all the products will be consumed in the ending sectors.
01:47That means there are multiple layers of buffers in the system.
01:51That's why we are seeing the prices now moving sharply so far
01:56because we have all the stocks or the floating storage
02:00and also the commercial stocks within the refinery system.
02:04And also on the product level, we also have a lot of inventories.
02:07That's all the buffers that we have to, you know, to cushion us
02:13before we can see the real shortage on the physical market.
02:16But the buffers would last for how long?
02:18One to two months?
02:19You talk about buffers.
02:20China has buffers.
02:21That will last about three months.
02:22But by the end of April, they say, even China will start getting worried.
02:27Yeah, exactly.
02:28So the buffer differs from country to country.
02:30So we know that probably East Asia are in a better place.
02:34Like China, Japan, South Korea, they're better prepared for this.
02:37They have large inventories.
02:38For China, I think their inventories can sustain the current demand
02:43for about four to six months.
02:45That's a long period of time.
02:47And also Japan has large inventories, not just for crude oil, but for products.
02:51But if we look at other parts of Asia, for example, India, Southeast Asia,
02:57they don't have a lot of storage capacities to give them the buffers.
03:02That means that's immediate fee stock shortage for these refineries.
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