00:00Exactly. You're not the only person who is surprised that the events that occurred between basically Friday to now have
00:08pushed oil prices down this much.
00:11I think that that is probably a sign that it's not just geopolitical events.
00:16I mean, right now we have the same issues going on straight up for moves that we've had for a
00:21while.
00:21There is a U.S. blockade. There's Iran also not letting ships through.
00:26We've got mines. Apparently another ship hit a mine and it was damaged over the weekend.
00:32We've also got issues in the Red Sea. The Houthis have threatened Saudi oil.
00:38We've seen a lot of tankers and other ships lose insurance coverage now.
00:42And so they're now having to add. They used to be going around Saudi Arabia, going into the Red Sea,
00:51picking up oil, coming out.
00:52That adds a little bit of time if you're going to Asia. Now they've got to go all the way
00:56around Africa, essentially, and pick up oil in the Mediterranean that's either gone through the Suez Canal or along a
01:04pipeline there.
01:04So they're adding a lot of time. We've got outages from Kazakhstan.
01:08Their, you know, outages, their oil is now down about half. They're only exporting about half as much as they
01:15were.
01:16We have now reports just this morning of some damage to Saudi oil infrastructure along the east-west pipeline.
01:23Some pumping stations appear to be damaged. A refinery is damaged.
01:27We're waiting for more information. But all of this actually says that supply is down as opposed to up.
01:34And yet oil prices are down. And so it certainly seems like really what we should be seeing is an
01:41increase in oil prices, not a decline.
01:44Ellen, if I'm Iran, don't I need the Strait of Hormuz open as much or more than anybody?
01:49Or do I have other ways to get my oil out of the country?
01:53So they really have very few options to get their oil out of the country.
01:56It's it's not really feasible for them to ship it, you know, by rail out at the other side of
02:04the country.
02:04They're not set up to do that. So, yes, they do need the Strait of Hormuz to be open.
02:09They need to be able to use the Strait of Hormuz.
02:11That's why, you know, every time Iran before this incident would threaten to close the Strait of Hormuz,
02:16it was always kind of a it didn't really make sense because if they're if they're going to not let
02:22anyone send oil out of the Strait of Hormuz,
02:24then Iran's oil would presumably be stuck as well.
02:27And so I think we've gotten to the point where they got some oil out.
02:32They've got this breathing room. And so they just don't see any reason to there's no they don't have the
02:38same kind of pressure on them to work out a solution.
02:43How are the oil importers reacting? And I wonder if the way that they're reacting has any impact on oil
02:49prices and how they move.
02:51So it's very interesting. What we've seen from China is that China is a big importer of Middle East oil.
02:57Now, if this conflict had happened, you know, 20 years ago, we'd be in a very different situation because back
03:03then the West,
03:05particularly the United States, was much more dependent on Middle Eastern oil.
03:08But now it's Asia, especially China. That's the big customer for this Middle Eastern oil.
03:14And so what we've seen is that China has cut their imports quite a bit since this this started happening.
03:22And that's definitely given the market more breathing room. But this is not a situation that seems to be able
03:27to last forever.
03:27It's not necessarily due to major declines in consumption.
03:31For example, they're probably tapping some of their reserves. But this can't continue, you know, go on indefinitely.
03:37And at some point, they are going to increase their imports. They have increased it somewhat.
03:44That's what some of the early data is showing. But it's unclear whether that's going to hold since there's been
03:50so much fluctuation in prices recently.
03:53So what's Saudi Arabia doing here? Do they can they take care of their distribution through the pipeline or do
03:59they need the Strait of Hormuz open?
04:01I'm just wondering about some of the neighbors in that part of the world.
04:03What kind of pressure they can put on both sides, Iran and the U.S.?
04:07So Saudi Arabia is probably in the best situation of any of the oil exporters in the Middle East.
04:14Not only are they blessed with incredible geography, which they have taken advantage of.
04:20I mean, they really if you want to talk about being prepared for something like this, Aramco and the Saudis
04:25were very well prepared.
04:26They've got this east-west pipeline so they can pump oil in one part of the country and ship it
04:32all the way across the country to basically their ports in the Red Sea, which was working great.
04:38Now, the pipelines aren't set up for the same capacity that they would normally be shipping out of the Persian
04:44Gulf.
04:44But they were able to maintain, you know, sales.
04:47They were able to get oil to their customers, you know, in terms of the contracts that they've already have
04:52in place.
04:53The problem now is that if these facilities are being attacked, then they're really potentially going to be hurt now.
05:01Plus, they can send oil out of the Red Sea.
05:04But if the Houthis are threatening them, then they've got to send it north to the Suez Canal.
05:09And the Suez Canal is not equipped to handle a fully laden, very large crude carrier.
05:14So that ship has got to either offload some oil or they've got to split it into two smaller ships
05:20because we do not want to see a repeat of getting a ship stuck in the Suez Canal.
05:25No, you don't.
05:26Before we let you go, Ellen, just a final question.
05:28Does OPEC or OPEC Plus, which is OPEC and its allies, do they matter at all in everything we're talking
05:34about here?
05:35You know, it's a really good question.
05:36I actually argued recently that they don't essentially they don't they don't matter.
05:41There's really nothing they can do at this point that can help the situation.
05:45They've got to just wait it out until, you know, things open up because there's really very little they can
05:50do.
05:51They can put through, you know, production increase after production increase.
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