00:00Carol, we were just speaking there with Paul about the outlook based on a number of analysts with the current
00:06situation in the Strait of Hormuz.
00:08Is your expectation then we will not get a resolution at any point that could at least get some of
00:14the flows through the strait moving anytime soon?
00:19Look, we've been on this up and down with this war in Iran since the beginning.
00:24One day we are optimistic that it's going to be over soon, only to wake up the next day and
00:31face another reality.
00:32And this, I would say, the kind of situation we have to brace ourselves in to expect this kind of
00:39volatility and uncertainty to stay with us for some time because of the unpredictability of what is the end game
00:48from this war?
00:49What does it mean to win this war? How does it look like?
00:53It's still really quiet, foggy. That said, I am a bit concerned not from the economic side.
01:00Actually, this is where I would see it as a story with two sides because, yes, we do have the
01:06oil price crossing this kind of psychological threshold.
01:10But I fear that of $100. But I fear that because the economic pain, the impact on the global economy
01:20as a whole, of course, there are some countries that are suffering more than others because of the high energy
01:25prices.
01:26But we are not really seeing the macroeconomic shock that we were accustomed to in the past.
01:31Because of that reality, the fact that the markets have proven to be much more resilient, I fear that there
01:38is no strong incentive for politicians, particularly for the U.S. administration, to end this war anytime soon.
01:46You may argue there are midterm elections looming, but the subject is not really a fait accompli.
01:52We can argue it in different directions.
01:55But I fear that as long as the cost of this disruption is not felt evenly in the world, it's
02:02not causing enough pain, we should expect that conflict to drag on.
02:07Well, Carol, you don't believe this is a new floor, then, that we've seen.
02:12Why is that?
02:15No, I don't believe there is a floor or a ceiling at this stage.
02:18But definitely the 100 or the high 90s is not a floor because it's primarily driven by geopolitics.
02:25We are in a boiling stage, which is very different from what we saw a few weeks ago.
02:29And it's not just only the escalation with Iran, still the targeted attacks.
02:36They are more restrained than what we saw perhaps at the beginning of this conflict.
02:40But you also have on the side the Houthis attacks in the Red Sea and on Saudi Arabia's facilities.
02:46You do have the Ukrainian war not showing any sign of resolution anytime soon.
02:51And at the same time, you do have some news from China that their demand picked up compared to previous
02:58months, but it's still low year on year.
03:00But primarily, you have the main driver geopolitics.
03:03And if the last few months or six months or more so, actually nine months perhaps until now or eight
03:08months, are telling us is that, yes, prices can go higher.
03:12And they were at much higher level in April, but they can shed in one week.
03:17We saw a drop of almost $20, $40 at one point because of geopolitics.
03:22So that's why we should be careful not to rush and identify any floor or ceiling at the moment.
03:28If we take a look at current inventories, Carol, how much do you think is already priced in to future
03:36prices?
03:37How much of the geopolitical premium are we already seeing globally?
03:43It's quite significant.
03:44I don't think that anybody can put a particular figure on the geopolitical risk premium.
03:50But I would say let's take the last few months as example.
03:54The second we saw an ease of the tensions in the region, in the Middle East, we saw a brand
04:00going down to $80 just suddenly.
04:02And that by itself still gives you an idea of the scale of the geopolitical risk premium.
04:07You mentioned inventories.
04:09Yes, the picture there is worrying.
04:11If you only look at the headline numbers.
04:13But again, when I look at the picture in more detail, first of all, we don't have the full picture.
04:19We don't know how much there is in China.
04:22The non-OECD inventories remains a guesswork.
04:25And that's why we should be careful not to rush into highlighting the sign of crisis.
04:30And if really inventories were drying up, as some analysts are saying, we should have expected to see prices to
04:37be much higher than the current levels we are seeing, given the scale of the disruption.
04:44All right.
04:44Thank you so much, Carol Naklay.
04:47I think we actually have time for one more.
04:49Carol, what determines the price action moving forward?
04:52What is it that you're looking forward to?
04:55Definitely.
04:56I wake up and I look at the political news at the rhetoric coming from Washington and from Tehran.
05:01But if you ask me to take a little bit longer view, I would say I'm keeping an eye on
05:06the U.S. midterm elections, because this is perhaps what the Iranians might be betting on.
05:11They can sustain the economic pain a little bit longer, hoping that as we get closer to the midterm elections,
05:18the Trump administration may be willing to make concessions and end this conflict.
05:23But we have to also be careful not to bet too much on that.
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