00:00We're still seeing crude for physical delivery hold at $125 a barrel, right?
00:06Even as we saw futures drop to almost 90 for both Brent and WTI.
00:11How does that relationship look now compared to normal times?
00:16Yeah, thanks so much for having me.
00:18I mean, in simplest terms, the physical market is trading off of reality,
00:23you know, what we're seeing on the ground,
00:24whereas the futures market is trading off of what the hopes are for the situation in the Strait of Hormuz
00:31a month from now, two months from now, right?
00:33So the reality is that there is still a virtual standstill in the Strait of Hormuz.
00:40There's really fierce competition for oil in the North Sea,
00:43and we're seeing pretty extreme product drawdowns in the U.S.,
00:46and people have been really kind of looking and banking on the U.S.
00:49to offset a lot of those supply disruptions that we're seeing to Middle East flows, right?
00:55In the futures market, however, like you had said earlier,
00:58there's an interest among both camps to restart flows through the Strait of Hormuz, right?
01:03So I think there's a hope among investors that in a month's time from now,
01:09even if we don't see flows return to what they look like normally,
01:14there will be greater movement than there is at the moment.
01:18And I think we're seeing these days maybe 7 to 10 ships pass through,
01:22and regular times it's around 135 ships passing through the Strait of Hormuz.
01:28Each day.
01:28Yeah.
01:29So in terms of where we go from here, because, of course, especially for this American economy,
01:32it's not just energy prices, it's also gasoline prices, which are now about $4 a barrel.
01:37Matt was mentioning some of Goldman's expectations.
01:39What are the expectations of how prices behave from here?
01:42So as far as oil prices, it really depends on where we move forward with negotiations.
01:47So a lot of the outlooks that I'm looking at from banks as opposed to kind of being uniform with
01:54maybe one price
01:54and one or two deviations depending on sort of what unfolds among markets,
02:00it feels like they're very scenario-based, right?
02:02So at this point, we could rather have the ceasefire extend from just the two-week period to sort of
02:10endure past that.
02:12We could see a reopening of flows in the Strait of Hormuz.
02:15In that case, prices wouldn't go back to pre-war levels because at this point,
02:19you know, we have a potential toll booth situation with Iran.
02:24We have a premium, an insurance premium.
02:28At this point, we have damage to Gulf infrastructure.
02:30So in that case scenario, people tell me that prices will likely stay, you know, in the 90 to maybe
02:38100 trend range.
02:40But there's also scenarios where the price can go a lot higher from here.
02:44So in the case that, you know, maybe talks break down Saturday, there is no sort of consensus
02:50in terms of reopening the Strait of Hormuz and restarting flows.
02:54If we see a worst-case scenario, which some banks have outlined,
03:00where we not only see depressed flows in the Strait of Hormuz,
03:03but also depressed flows in the Red Sea if the Houthis start up hostilities,
03:07we could see prices going much higher from here.
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