00:00You've written this article called A Tale of Two Straits, which I think is clever and slightly more clever than
00:06my Schrodinger's straight I've been trying to make happen.
00:09But can you please explain to us what is going on?
00:12Just get us up to date about what's moving, what's not moving, and if there is any kind of look
00:17ahead that's even possible right now.
00:20Yeah, thanks so much, Christina.
00:21I am in Washington, and it's great to join you again.
00:23So the story is since the war began, there's basically been three export routes for oil that's being produced inside
00:33the Persian Gulf.
00:34That is the Strait of Hormuz, which was disrupted early.
00:38And there's two bypass routes, the bypass route through the United Arab Emirates, and then what we're talking about right
00:44now, which is this east-west pipeline that goes to the west coast of Saudi Arabia through a port called
00:49Yanbu.
00:50So over the course of the conflict, that port and that pipeline have become more important.
00:56In August, that pipeline accounted for about 4 million barrels a day of exports.
01:00That's up from about 1 million barrels a day prior to the war, and that was almost 30 percent of
01:06total exports from the Persian Gulf.
01:08So the attack on this pipeline is a serious hit to the ability to move barrels out of the Persian
01:17Gulf.
01:17And that's what we're seeing now.
01:19We're seeing that Saudi is telling European countries that they're going to be missing deliveries next month, that they have
01:25contracted.
01:26It's still a little too early to say how long this disruption will last.
01:31Saudi Arabia claims that they'll be able to get some production or some movement through the pipeline in the next
01:37few days, but it could take a month or more to fully repair the pipeline.
01:42Longer term, I think this creates another risk, right?
01:45We've seen now that flows through this pipeline can be disrupted by attacks from Iran-aligned groups in Iraq and
01:54in Yemen.
01:55And so it's just another risk to the overall output from the region.
01:59Chris, it's time for a weekly segment on the refining crisis, the global refining crisis.
02:03And we got news yesterday.
02:04I was on air on Bloomberg Television when we heard that Europe isn't going to receive a pretty substantial amount
02:09of crude here in the month ahead from Saudi Arabia.
02:12What does that mean for Europe and for the global energy picture more broadly?
02:17Yeah, as you mentioned, I mean, the real crunch right now is on these oil products, refined products and diesel,
02:23gasoline.
02:24But diesel is the big one right now.
02:26So diesel accounts for about 30 percent of oil output goes to be produced.
02:31These middle distillates are in primarily diesel, which is sort of the workforce of the global economies as a transportation
02:37fuel.
02:37We're at record highs in the U.S.
02:40But this is really a global challenge.
02:42And, you know, the Europeans are going to be facing a crunch.
02:47If they can't get crude from the Middle East to run into their refineries and turn into diesel and other
02:51products, they're going to be pulling more from the U.S.
02:54And we saw last week that the U.S. was again touching sort of record crude exports.
02:59We expect that pressure to continue as countries around the world look for alternative supplies for crude.
03:05But for the time being, we're not really seeing this crunch on diesel alleviate.
03:10And it's, you know, the pace of price increases has slowed a little bit.
03:15But as you mentioned, we're at a record high in the U.S.
03:18And that's really the story around the world right now.
03:21I also want to ask you, I mean, I will admit I don't normally read J.P. Morgan commodities reports,
03:25but one of them did catch my eye this week.
03:27And that's that their commodities team said basically it's no longer offering forecasts for when it thinks this war might
03:33end.
03:33The quote is, for the first time since the start of the Iran conflict, we don't have a baseline view.
03:38We simply don't know how to model the endgame.
03:40How often do you see something like that from a group like this, who that is their main bread and
03:44butter is offering this guidance to investors?
03:46And how significant is that?
03:50That's a great question.
03:51I mean, I have to be honest.
03:53I've almost thrown my hands up several times over the past months as well.
03:59But it's true.
04:01And I think in their note, they reference that the market is right now pricing in about 4 million barrels
04:08a day less than what we're seeing be produced globally.
04:11And so that's really reflecting this geopolitical risk.
04:14And I think it's coming from a couple different factors.
04:16There's, of course, what's happening in the Middle East.
04:18There's what's happening in Russia with continued Ukrainian attacks.
04:21But also, we don't know when China is really going to ramp up purchases again.
04:26All three of these things are really outside the normal bounds of what a commodities analyst would be expected to
04:33prognosticate over.
04:34These are geopolitical factors that are very hard to predict.
04:38And so it's not entirely surprising.
04:39But it just tells you how much of the global oil market is being driven now by things that are
04:45really difficult to model.
04:48Chris, I want to pivot here and ask you about Greenland, which has reared its head once again with this
04:52announcement that we got from the president about this new security arrangement.
04:55And I'm drawn to a piece by your colleague, our colleague, friend of the show, Josh Wingrove, about the announcement,
05:00and one line in particular.
05:02It's unclear how the new deal materially changes the current security arrangement with Greenland.
05:06The U.S. has long had enormous latitude to decide troop levels on the island and has, in fact, been
05:11scaling back its presence there for decades.
05:13How do you see this advancing the narrative, if at all?
05:19Well, it will hopefully tamp down some of the threats we've seen from Trump over the past 12 months.
05:28And I think that that's the real impact.
05:30I see it as basically the status quo with a few economic security commitments, so Greenland won't be host to
05:38major investments from the Chinese or Russians.
05:41I'll note that the Chinese have attempted to make big investments in Greenland's mining sector in the past.
05:47Those haven't gone very well.
05:49It's a very difficult environment to operate in, and they've faced the same struggles that other countries have.
05:54So I really don't see this as a major shift from the status quo.
05:58But if it's enough to keep the White House from continuously making these threats or alluding to the possibility of
06:07taking over Greenland, I think that overall that's probably good for the transatlantic relationship.
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