00:00Bob McNally of Rapidin Energy Group writing, even if Hormuz tanker traffic resumes shortly, the risk of a summer or
00:06fall oil spike has not completely disappeared.
00:10Bob joins us now for more. Bob, great to see you. Thank you for being here.
00:14Let's just start with the move so far. Have you been surprised by how much of the risk premia have
00:20been taken out of oil markets since the initial discussions of some sort of resolution?
00:26Hi, Lisa. Yes. Rapidin, I've been much more successful at predicting this crisis and analyzing it well before it happened
00:34than we have how prices behaved since it started, really.
00:38I think it's oversold. I think the market continues to have a strongly optimistic bias toward this crisis.
00:47President Trump has validated that with what looks like a now-assigned MOU. We have to see the details.
00:53But yes, I think I'm still surprised and I think it's unwarranted.
00:57And I think a lot of this sell-off is going to retrace when those inventories keep drawing in the
01:03coming weeks and months.
01:04The view on markets from markets, Mike Wilson of Morgan Stanley was just on and he said,
01:09what we've learned throughout this conflict is just how well supplied we actually are,
01:13that actually there's plenty of oil sloshing around.
01:15The reserves in China in particular have been incredibly robust, not to mention the others.
01:20Why don't you believe that's enough?
01:23Well, that only explains how we skated by the last few months.
01:27What we have to wait for now is when the shortages start to appear and further inventory declines.
01:34On a seasonal basis, we are at 11-year lows in U.S. gasoline stocks, 29-year lows in distillate
01:40stocks,
01:40and our SPR is at 43-year lows.
01:43And we're going to be soon, IAA is reporting we're hitting new multi-year lows in commercial inventories.
01:48Lisa, I see this almost as an echo of 2022, when the market mispriced the Russia disruption.
01:56Back then, it was pessimistic.
01:58Crude oil prices roofed in the first half of the year, despite two SPR releases,
02:02because the market believed we were going to lose three or more million barrels a day of Russian supply.
02:07But in the second half of the year, when the data showed that didn't happen, Russian supply was not disrupted.
02:14It was reshuffled.
02:15Prices aligned.
02:16Now the market has taken a very optimistic view of the largest actual disruption.
02:22We've lost three or four times what we thought we were going to lose in 2022.
02:26So it could be that all of us barrel counters just got it wrong.
02:30But I think there's a mispricing here.
02:33And yes, we were well supplied as long as we destock and as long as China went on a crash
02:39diet and stopped importing crude oil.
02:41It's like holding your breath, though.
02:43You can do that for a while, but you can't do that on a sustainable basis.
02:46Eventually, you've got to exhale.
02:48You've got to eat.
02:49You've got to drink.
02:49And when Asia comes back to buying, as we get in the high demand season here in the summer,
02:54I think oil prices are going to head up.
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