00:00Great to have you on the program again. So what is actually driving this move we're seeing on oil markets?
00:05Is it geopolitics, fundamentals, or what traders were already expecting?
00:11Well, it's definitely geopolitics because for oil prices to suddenly drop, let's say, from Friday to Monday by $10, more
00:18than $10 a barrel,
00:20that tells me it's not really about suddenly the market is flooded with supplies because the state of Harmos has
00:27not resumed traffic normally.
00:28So it's definitely this risk premium of the fear that market observers and traders have placed on potential escalation or
00:37resumption of attacks between the U.S. and Iran.
00:41And that seems to have dissipated at the moment. That said, it has not been eliminated completely because we don't
00:47have really a final deal.
00:49We don't have peace and everybody living happily ever after.
00:53We have a pause and a potential route to a resolution that can establish a more durable, peaceful situation nowadays
01:02and the opening of the state of Harmos.
01:03But we're not there yet.
01:05Now, President Trump says, let the oil flow. Is that really shifting the market or just triggering a knee-jerk
01:12reaction?
01:13Is it all about that detail you mentioned?
01:16I think it's more about market sentiment, because when you say let the oil flow, it simply implies that we're
01:21going to open the Strait of Harmos,
01:23that tankers can sail in and out of the strait, and that will restore global oil trade to the pre
01:30-war level, to pre-conflict level.
01:32And also, there won't be shortages. There will even be some relief or a waiver on even Iranian oil, which
01:40was heavily sanctioned even before the conflict.
01:43So that's what it means. But it does not mean that it's going to happen overnight.
01:48It will take a little bit of time to restore that.
01:50But most importantly, we need to see greater confidence in the situation in the Middle East.
01:55There's not going to be another escalation suddenly.
01:58And at the end, the conflict overall is not over.
02:01We still have, for example, Israel and Hezbollah trading attacks from time to time, and that could have spillovers on
02:07Iran-U.S. relationship.
02:08But at the moment, yes, it means market sentiment is much more positive and much more optimistic than only a
02:15few days ago.
02:16You're saying there's no quick fix. Things will take time.
02:19But if tensions do ease, what tends to shift first?
02:23Is it supply? Is it shipping routes or prices?
02:27Look, at the end, what we have today, what we have had in the last few months is mainly a
02:32logistical constraint because the Strait of Hormuz was blocked.
02:36So we did not have a destruction of infrastructure.
02:39Yes, we did have some attack on some production facilities or processing facilities and some refineries.
02:46But we did not really have, let's say, oil and gas fields being damaged or an entire complex being set
02:52on fire.
02:53We had logistical constraint in the shape of the Strait of Hormuz, which was blocked.
02:57And as a result, if you open the Strait of Hormuz, you are removing that logistical constraint and traffic should
03:04resume.
03:05It might take a little bit for all the traffic to re-resolve because you cannot expect all the tankers
03:11to go all at one in one go because of the end, the Strait of Hormuz is a narrow water
03:15passage.
03:16But at least it's much better than having a complete blockage of the Strait.
03:21Carol, what's the biggest factor that decides whether oil holds these levels or breaks out of them again in the
03:29days ahead?
03:31The major factor would be some increase in the number of tankers passing through the Strait of Hormuz.
03:38That's what the market wants to see.
03:39And as long as we still have very timid, maybe few tankers, less than 10, passing through the Strait and
03:45we don't see a notable increase,
03:47I'm not saying we have to go back to the hundreds of tankers that we're sailing through,
03:52then we should expect to see this kind of floor to the oil price of 80, let's say $80.
03:57It cannot be so precise, but just to give an example.
04:00And then the more we see tankers sailing through the Strait of Hormuz and a diffusion of the tension between
04:06the U.S., Iran and Israel,
04:08then we should expect to see further downward pressure on prices because market fundamentals without the geopolitical risk premium do
04:16not really justify the current price level.
04:18So,
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