00:00We heard from President Trump saying very good things are happening on the Strait of Hormuz.
00:04I mean, in your conversation with traders in touch with the vessels on the Strait of Hormuz,
00:09what's happening there?
00:11Well, we need to compare what is happening now to what was happening six weeks ago.
00:16Six weeks ago, the Strait was open.
00:19After the attack by the U.S., the Strait is closed.
00:24Now, Iran has allowed some ships to go through.
00:28And at the moment, there are three VLCCs that got out most recently.
00:35Two are from Saudi Arabia.
00:36One is from Iraq.
00:38And they're on to their destinations.
00:40But now that the oil is flowing, the U.S. is saying, let's close it up again.
00:45So this is really, in one word, demented.
00:49It makes no sense what the U.S. is doing because they are so focused on Iran
00:55that they're losing sight of what they're causing to the world.
01:00And the pain is in Asia.
01:02The pain is in the South Pacific.
01:05The pain is in anybody that depends on oil.
01:09In addition, most of us are only focused on oil.
01:13But there's fertilizers, there's aluminum, there's food.
01:17If you close the Strait, as the U.S. is intending to, what's going to happen to the food in
01:23into the region?
01:25I mean, there are so many implications here.
01:28Many airports in Europe are already saying that they're going to run out of jet fuel in two to three
01:33weeks.
01:34And we already have kind of semi-riots in Ireland.
01:38I mean, the world's really falling apart.
01:40What's your understanding of this blockade?
01:42How might this take place?
01:45What form?
01:47There is the version that Trump put out on his Truth Social.
01:53And he was going to stop any vessel that pays the Iranians any money.
01:59To begin with, that money will be paid in yuan or in bitcoin.
02:03So there's no way for the U.S. monetary system to trace it.
02:07That's number one.
02:09Number two, who are you trying to punish?
02:11Only the Iranians or every other producer in the region, like Saudi Arabia or Iraq?
02:17So in the latest version that is coming out after Trump's Truth Social,
02:22is that they will only stop the vessels that come from Iran.
02:27And the rest will be free passage as the Iranians control on the other side.
02:32If they do that, a lot of that oil goes to China.
02:36So then the U.S. would be stopping vessels that are into China.
02:41What does the Chinese Navy have to say about that?
02:44This is very dangerous because now we're transforming a regional fight into potentially a global fight.
02:51So with the traders this morning, they're kind of relaxed because we all think that this is too crazy to
02:59block it on both sides.
03:00It really makes no sense because the one that you're punishing is the Asian consumer first and the European consumer
03:07second.
03:08So are you then saying that the prices we're seeing this morning is not reflective of the risks out there?
03:16Absolutely correct.
03:18The number we saw this morning, 103 or whatever, 8% increase, is not reflective at all of what could
03:26happen
03:26if the U.S. really at 10 p.m. or 10 a.m. their time decide to go with this
03:33interdiction.
03:34It really makes no sense.
03:35It should be 140, 150, whatever.
03:38Today it should be 140, 150.
03:40Correct.
03:40Correct.
03:42And when do you see that happening?
03:43I mean, why is there such a mispricing?
03:47Why are traders actually missing out?
03:49Or maybe pricing in would be the thing.
03:53One of the traders I spoke to yesterday is Trump will tackle again because the pressure that he will be
04:01in that office to say,
04:03please don't do it.
04:04You saw already overnight that Britain said they won't participate in the blockade
04:10and this morning that Australia won't participate in the blockade because they're not crazy.
04:15They will not commit suicide.
04:17This is economic suicide for the region.
04:20So what I am surprised about is that China and Korea, who depend very heavily on oil coming from the
04:28Arab Gulf,
04:30are not making any noise.
04:31It's like they just take the punches, right?
04:33They should say, hey, we need the energy.
04:36Singapore needs the energy to run the refineries.
04:39What is the extent of disruption right now?
04:42And what would be the disruption be like should this blockade be successfully implemented?
04:49OK, the current loss is, call it seven, eight, seven to 12 million barrels a day.
04:56But if Trump does what he says, then we will lose fully forever those 12 million barrels a day.
05:06The Gulf kind of ships out 20 million barrels a day.
05:09But the Saudis are creating the alternative via Yambu.
05:15So maybe the net bottle then after you do all the infrastructure work is only between 13 and 15 million
05:23barrels a day.
05:24But then you have LNG, you have fertilizers, you have a lot of things that come out of the Middle
05:32East.
05:33So the implications for the world are very dire because that means that global GDP coming from that area is
05:41reduced between 10 and 15 percent.
05:43That's massive.
05:43But Jorge, there are alternative routes, right?
05:46Like the Red Sea, it is an alternative route.
05:48I mean, can all the oil that passes through?
05:53No.
05:54The Strait of Hormuz seek alternative routes.
05:56How much of that can seek alternative routes?
05:59Well, you would need to build additional pipelines to do that.
06:02But the pipeline and Aramco made a statement yesterday that has roughly 7 million barrels a day eventually available.
06:11It's not that amount is not flowing.
06:13But then there is another strait that is essentially controlled by the Houthis in Yemen.
06:18There's no alternative.
06:19The world needs to think that there needs to be a negotiation with the Iranians to calm things down.
06:27What they did yesterday was maximalist demands by the U.S., including for the Iranians to recognize Israel after the
06:38Israelis had essentially beheaded their leaders and religious leaders.
06:45It's not a reasonable request to have done.
06:48It just means we're going to show you we're the boss.
06:50So the Iranians are saying we're not listening.
06:53We're walking off, which they did.
06:54Right.
06:55You talked about how Asia will be hit in a big way.
06:59Can you quantify that?
07:00And which countries in particular do you see being hurt the most?
07:04It's like a pipeline that's being shut off.
07:07So the big ones that are being affected are Korea and Japan.
07:13Then potentially Singapore as a refining center.
07:16But Australia is already running out of diesel.
07:19Well, the Pacific islands that depend on vessels that are delivering to New Zealand and Australia and their supply, those
07:27far off Fiji, all those islands in the Pacific, they are really exposed.
07:33But in terms of major economies is Japan and Korea are the big ones.
07:39And they have no option.
07:41There's no alternative.
07:42Who has the pricing power right now?
07:44Is it the refiners?
07:46No, not at all.
07:47They have to pay what the market can bear.
07:51I was talking to one of the traders that supplies one of the refineries here.
07:56And he's saying we're looking at alternatives, but all the alternatives are expensive.
08:02And there is not enough oil in the world to supply what is being lost by the constraints in Hormuz.
08:10There just isn't.
08:11There has to be demand destruction.
08:12And for demand destruction to happen, then the price of oil needs to go to $150, $200.
08:19So already we see some demand destruction in the airlines, which are shutting down planes.
08:25So the Philippines is in a lot of trouble, really in a lot of trouble, because they depend on all
08:31these refined products and crude coming into their country.
08:35So Asia is really getting punched hard.
08:38But I don't see the countries making sufficient noise to tell Trump, stop it.
08:44Why did you start this?
08:46Why don't you negotiate in good faith?
08:48I mean, this trade was open before Trump started.
08:51Does the U.S. have pricing power?
08:53Oh, yes, because they have energy.
08:56So they are net beneficiary, big time net beneficiary.
09:00They're exporting a lot of crude oil and LNG.
09:03And as you can see from the tweets from Mr. Trump, a lot of vessels are going into the U
09:09.S.
09:09And yes, Japan and Korea are looking at the U.S. to replenish their oil.
09:15So it's India.
09:16So in your opinion, I mean, you've been watching oil flows for decades now.
09:21Yes.
09:22Have the supply chain, has the supply chain fundamentally changed?
09:27And in the longer term, what are we expecting?
09:30In the longer term, definitely everything has changed.
09:35And everybody is going to be looking at resetting their expectations on risk.
09:40Because this was not in anyone's, to quote one of my colleagues,
09:45this was not in my bingo card.
09:48Nobody was expecting this.
09:50But in the longer term, the exposure to the Middle East is very high, but there is no option.
09:57Maybe they need to look more at renewables.
10:01But also the destruction of the refineries.
10:04So products are going to be higher than they need to be.
10:07I was talking to a taxi driver yesterday here.
10:10He was paying for his diesel 180 before this mess.
10:14And now he's nearly paying $5 per liter.
10:18That's quite a jump.
10:19Right?
10:20And we will see more of that.
10:22And for traders, where are they making their money?
10:25Is it in arbitrage?
10:26Is it in volatility?
10:28You're in conversation with them?
10:30Yes.
10:31The main things are arbitrage and volatility.
10:34You need to speculate a little bit on price direction, which I think some in the U.S. administration
10:41know better how to do.
10:42So some of the very professional houses in trading have not been having a good time.
10:49And there are a lot of reports in the Wall Street Journal and Bloomberg about such things.
10:54Your organization has been covering quite well.
10:57So it's not that easy.
10:59But they're very good at arbitrage.
11:02Right?
11:02If Korea needs a cargo that is no longer available from the Gulf, is this cargo going to come from
11:10Africa, from the U.S., from Latin America?
11:13And that's their job.
11:15They just try to patch things up.
11:16Jorge, before we let you go, if you were to predict the price of oil, you know, on average
11:22for the rest of the year, where do you think we will stand with that?
11:26Oh, we're going to stand much higher than we have been.
11:29Which is?
11:30Before the war, we were closer to 65, right?
11:34Right now, if Trump keeps on doing these things, we're going to be over 100.
11:38I think the pressure is going to be on him to throttle things back.
11:43So it wouldn't surprise me if for the rest of the year we hang closer to 100 but below it.
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