00:00Brent Crude, flat, not doing anything this morning.
00:04No reaction really, as much at least, to those geopolitical headlines that we're seeing out of the Middle East.
00:10So do you think the market is finally overlooking this geopolitical risk premium?
00:18So I think the market, thanks, Abir, wonderful to be with you.
00:21I think the market is responding to competing trends, right?
00:27They've struggled to price these risks for some time.
00:32But what we're seeing the market react to is, on the one hand, Chinese demand continues to be much weaker
00:40than it was before this conflict started.
00:43And we're seeing some increase in volumes as tankers linked to governments, such as the UAE, are getting some supplies
00:53out.
00:54But I think in this context, markets are overlooking the fact that buffers have been drawn down and that this
01:03conflict could continue for some time.
01:07You know, it's not clear to me that the U.S. government is ready to really target the Chinese ports
01:15and infrastructure that buy Iranian crude.
01:17So we'll see what happens.
01:21So if that is the case for a while, Rachel, and that looks to be what the market is estimating,
01:27a constrained movement in the Strait of Hormuz, what do you think?
01:30What product do you think will be the biggest headache or will have the biggest upside movement?
01:35Would it be Brent crude?
01:36Would it be oil itself?
01:38Would it be LNG or other crude products?
01:42Yeah, I think we're going to see that the stress particularly will continue to be in diesel, in oil products,
01:53even gasoline.
01:54Though gasoline is off, at least in the U.S., a little bit.
01:58LNG, too, continues to be in short supply.
02:02The Qataris are preparing and looking to bring more supplies to market.
02:07But LNG can be more dangerous to shuttle or more difficult to shuttle out.
02:14And we're heading into this important period of the year where the Europeans, where the Northeast Asian buyers inject more
02:25fuel into storage.
02:26So I think we'll continue to see that trend.
02:30Also, I think we'll continue to see it reflecting in some other parts of the commodity class.
02:37Into metals like copper, which are still facing some of the restrictions, restrictions from sulfur.
02:48OK, so, Rachel, when it comes to the economic damages that have resulted as a part of this constrained movement,
02:57do you think that the market is underestimating just how much economic damage we would have,
03:01even if oil flows theoretically do go back to normal?
03:07Yeah, so I think the markets really, the broader global markets, very focused on the AI sort of scale up.
03:15And that's why they have been underestimating.
03:19But we have to recognize that globally, we are less reliant on oil for GDP growth and earnings than we
03:27were even 10 years ago.
03:29So the good news or the resiliency story is that that link has started to ebb.
03:38The other part of the story on the power side and LNG is that more renewables are being installed.
03:45So this is a pain, a damage we haven't fully recognized.
03:49But there have also been some shifts in demand that make it better than it could be.
03:56And I also think we have to recognize the importance of flexibility of getting supplies to market
04:06and the new investments that are occurring.
04:08So it's a mixed story here and one that I think we'll see continued through the inflationary channel
04:16as well as somewhat slower growth.
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