00:00It's not just the price of oil and natural gas outside North America that have gone up.
00:05Also, refining margins have been incredibly high through the month of March.
00:10And both Exxon and Chevron indicated that they run the refineries very hard through that period.
00:17So I think that that is one of the key reasons that the results have been as good and surprising
00:22to the upside to Wall Street.
00:24We've been hearing from the administration President Trump met with the head of CENTCOM,
00:27and it seems like they want to stick with this blockade.
00:30I have two questions for you.
00:31How much pain is this actually inflicting on Iran?
00:34And talk to us about the storage issue.
00:37The administration says Iran is running out of storage.
00:39Is that real or not?
00:41Well, starting from the first part of your question, it's inflicting quite a lot of pain
00:47because Iran effectively is losing around $175 million a day in lost income from the oil revenue, from the oil
00:56exports.
00:57But the key question is, is that enough for Iran to come to the negotiation table with an offer that
01:03is good enough for President Trump?
01:05And the answer potentially is not enough.
01:09Iran made quite a lot of money for the first two months of the war where it was able,
01:14and the U.S. have no problem letting Iran sell in his oil.
01:18So in some way, they have some money that they cash in in the early days and weeks of the
01:25war,
01:25and they can use that extra money that they made to cushion the current blow.
01:30On the question of is it going to be any long-term damage to the oil wells, my view is
01:38no.
01:39First of all, Iran is still loading oil into tankers.
01:43It was on Friday, according to satellite pictures that we were reviewing at Bloomberg, loading a supertanker at Khair Island.
01:51So that's an indication that Iran still has access to tankers that they were inside the Persian Gulf when the
01:57blockade started.
01:58And it has onshore storage.
01:59So I don't see Iran having to start reducing production at the earliest until probably the middle of May.
02:06And will that cause some damage? Probably not.
02:10And even if there was some damage, will be that really what is going to prompt the Iranian authorities to
02:17come to the table with an offer that President Trump is satisfied?
02:20Again, I don't think so.
02:23In the midst of this ceasefire, how much production is Iran able to do?
02:27Just give us your vantage on the degree to which oil production in Iran continues apace.
02:33Well, if we look at crude oil and condensates, Iran was producing around three and a half million boroughs a
02:39day.
02:40It's 14, about 1.8 million boroughs a day.
02:44The rest goes to the domestic market.
02:47So Iran needs to produce somewhere between one, seven and one, eight million boroughs a day just to keep the
02:53country fuel.
02:55Perhaps the demand now in Iran is a bit lower than otherwise because of the destruction of the world, because
03:01people are not traveling, because mobility is down.
03:04But Iran is a big oil consumer on his own.
03:08So a significant chunk of his production goes into the domestic market.
03:12And then the rest of it goes to the export market.
03:15At the moment, Iran is loading steel tankers.
03:17But those tankers cannot really reach the high seas that are stopped by the U.S. Navy.
03:22That's where we are today.
03:24At some point, they will run out of tankers.
03:26They will need to start storing the oil onshore into tanks.
03:31And at some point, they will have to reduce production, cut, shut down the wells, shut in the wells, as
03:37we call it, in the oil industry.
03:39That moment has yet to arrive.
03:41You said Iran probably has to make those decisions starting at the end of May.
03:45What about other big producers in the region?
03:47Are there any other producers that you think are nearing or will near their storage capacity and start to throttle
03:54back potentially sooner rather than later?
03:56Well, every other producer in the Persian Gulf have already maxed out their storage capacity.
04:03That's why production in places like Kuwait, Iraq, Qatar has completely collapsed.
04:08Saudi Arabia and the United Arab Emirates continue to produce oil.
04:13That's because they have bypass pipelines that they can bypass the Strait of Hormuz, reach the Gulf of Oman in
04:23the case of the UAE or the Red Sea in the case of Saudi Arabia.
04:26That's the reason that they keep producing.
04:28But everyone else in the region has to take those decisions to shut in oil wells in the very early
04:35days of the war.
04:37And no one really at the White House is talking about the Kuwaiti oil fields exploding because they have to
04:44be shut down.
04:44I think that this focus on Iran having a particular problem is misplaced.
04:50Everyone in the region produce oil from very similar carbonate reservoirs.
04:56Yes, perhaps the Iranian oil fields are all there and have some low pressure.
05:01It has been under sanctions.
05:02They don't have American technology, but the Iranian petroleum engineers have been very creative over the last 40-plus years
05:10to keep those oil fields running despite everything.
05:15You mentioned the UAE.
05:16UAE is saying sayonara to OPEC+, which is meeting this weekend.
05:20So I imagine those members are going to lick their wounds and then try to plot a path forward here.
05:25What does that look like?
05:26How does OPEC-plus move on from the UAE going its own?
05:31Well, on the short term, nothing changes because with OPEC, sorry, with the UAE leaving, they cannot increase production because
05:39the Strait of Hormuz remains closed
05:41and the UAE is already maxed out on the bypass pipeline that they are using.
05:46So short term, nothing changed.
05:49Medium term, if the Strait of Hormuz reopens, the UAE will start increasing production.
05:54There will be demand for those barrels because we are really running down the world's oil inventories, both on the
06:02commercial side and on strategic inventories.
06:05Everyone is going to have to buy extra oil to replenish those inventories.
06:10But we were wondering where that extra oil was coming.
06:14Now we have a bit of an answer that extra oil probably is going to come from the UAE.
06:19Long term, that's a more difficult one.
06:22I think that the UAE keeps increasing production.
06:24I put Saudi Arabia on a corner.
06:26At some point, Saudi Arabia needs to decide, say, middle 27, early 28, do we want to reduce production to
06:34keep prices higher or we just join the United Arab Emirates?
06:38And that also, other members in that cartel are going to be thinking, are we taking the right decision, staying
06:46with the Saudis or should we follow the UAE?
06:49And I think that we are going to see, over the next few months, other countries are starting to talk
06:54quite openly about potentially leaving the cartel.
06:57That was my question, is if you look at those OPEC members, especially the ones who do throttle production.
07:02I mean, some, I think you can correct me around, Libya and Nigeria pretty much produce at capacity most of
07:07the time.
07:07But those who are really those big players have to be watching this very closely.
07:12And can Saudi hold this together?
07:13If you were going to pick the next potential defector out of OPEC, who would be your bet?
07:18I would say two names, one on the OPEC plus group, on the big alliance, that would be Kazakhstan.
07:24They are acting like they are out, but they are keeping inside because of the relationship with Russia and because
07:29probably they say, well, we're going to produce as much as we can.
07:34We are cheating all the time.
07:36Better to cheat within the group and we get some of the information and some of the upside.
07:41We are free riding, effectively, the cartel.
07:44But can Kazakhstan at some point say goodbye?
07:46I think that that's a candidate.
07:48The other one inside OPEC and one of the founding countries and one where the U.S. has a lot
07:52more influence, Venezuela.
07:55Yeah.
07:55The government of Delcey Rodriguez says that they are staying.
07:58But at some point over the next 12, 18 months, I will expect, I will hope that we will see
08:05democratic elections in Venezuela.
08:08If that election turns to opposition government, the opposition historically has been hostile to OPEC, and then we can see
08:18Venezuela leaving.
08:18And that will be a big deal because it's a country that wants to produce more oil, that is going
08:23to have probably the investment to produce more oil.
08:26And it was one of the founding countries of OPEC.
08:29That will be a big deal.
08:30That will be the first departure of one of the original founders.
08:35Javier, last question for you.
08:37Iran is doing all of this right now, and there is talk, I know, of finding ways to reroute oil
08:42going forward in the future.
08:44How long is that likely to take?
08:45How real is it that there could be kind of a whole new infrastructure built here in the next years
08:49or decades to get oil out of this region?
08:52Well, you don't have a lot of permitting fights in Saudi Arabia.
08:57The Royal Palace decides to do a new pipeline.
09:00They just do it.
09:01The original east-to-west pipeline, that is the one that we are using at the moment to bypass the
09:06Strait of Hormuz.
09:07That's the one that runs from the Persian Gulf in the east of Saudi Arabia to the west coast into
09:12the Red Sea.
09:13That was built in the 80s in four years.
09:16And that's when they have to build the whole line, do all the earth movement, all the difficult job.
09:25So I would think that four, five years max, we see a lot more pipelines.
09:31So we have this odd situation.
09:34We are at a peak of the influence of Iran on the Strait of Hormuz.
09:39They have never had a grip on the Strait of Hormuz as they have.
09:42But just because they are having that grip today, that grip over time will be weakened because more countries in
09:50the region will build bypass pipelines.
09:53I'm sure that Saudi Arabia will increase the capacity of their east-west pipeline.
09:57I'm sure that the UAE is going to do the same.
10:00Key question is, does Kuwait build a pipeline?
10:03And so through where, probably south to Saudi Arabia and then across to the Red Sea, do other countries, do
10:11Qatar build his own pipeline, perhaps through Saudi Arabia?
10:16That's politically more complicated.
10:18What Iraq wants to do has options through Syria, has another option through north to Turkey.
10:24There's already a pipeline there.
10:25It will be a question of expanding.
10:26So the region's pipeline politics are going to get really interesting over the next few years.
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