00:00Let's talk now to Claudio Gallimberti, the Chief Economist and Global Director of Market Analysis at Reistad Energy.
00:08Claudio, welcome. Good to see you. Oil prices soaring off the back of the anticipated Strait of Hormuz blockade.
00:15How badly have the markets been rattled since the virtual collapse of U.S.-Iran talks?
00:24Thank you very much for inviting me back. They have reacted in a quite expected way.
00:30So we had a jump close to 10 percent as soon as it was clear that there wouldn't be an
00:38agreement.
00:39But I have to say that if we just look at the financial markets, so Brent, the paper value of
00:47Brent, that is still at around $105, $110 per barrel.
00:53Well, if we look at the physical barrels, so the barrels that are delivered, those are at a much higher
01:00valuation, something like $150.
01:02I do believe that the physical barrels are more representative of the situation on the ground, which is pretty much
01:09the gravest supply crisis we have seen.
01:13And as hope fades for a quick diplomatic resolution of this crisis, are we looking at a prolonged energy shock?
01:26At this point, the answer is unfortunately yes. So the damage in the system is there.
01:35So we have lost, since the beginning of the war, $400 billion barrels of production.
01:41Now, the good thing is that we had quite high buffers going into this crisis, and therefore, we only right
01:50now begin to see the effect of that.
02:01And for those of us who are not experts like you, I mean, what does that mean in real terms?
02:21I mean, how extensive are the oil reserves of crude's largest consumer countries?
02:28I mean, how many days, weeks, months?
02:31It depends critically on the products we are talking about.
02:36So, for instance, jet fuel, aviation, those, for some airports in Europe, we are already very low.
02:45So some reserves can be released, but you can expect some localised shortages.
02:52When it comes to systemic shortages, Europe is still far away.
02:56We're talking about months.
02:58But when it comes to jet fuel, it's more a matter of weeks.
03:03For Asian, Southeast Asian countries, we have already seen the impact of that in government deciding to rationing some of
03:12the fuels or adopting policies that we last saw during the pandemic for the opposite reason, right?
03:19So we didn't want people to go around.
03:22Other parts of the world, like the United States, are more insulated.
03:26But even the United States, when it comes, for instance, to California, which is the most popular state in the
03:33United States, California imports a lot of fuels from Asia.
03:37Therefore, even California at some point will face the threat of a big shortage.
03:44So it's the largest, as I said earlier, this is by far the largest crisis we have seen.
03:51It beats the 1970s by a factor of two.
03:54Now, the only thing that we need to look at right now is the duration of the crisis.
03:59Of course, back in the 70s, those crises lasted for years.
04:03We are only right now day 44.
04:07But the longer it lasts, the more damage it will generate.
04:12And as I said earlier, we have lost 400 billion barrels of production, which is an astonishing high amount.
04:20Claudio, good to talk to you.
04:21Thanks so much for coming on the program again.
04:22Claudio Gallimberti, the chief economist and global director of market analysis at Reichstag Energy.
Comments