What did you take away from his opening remarks of the conference?

Yeah, I mean, y-you know, we had the IEF ministerial meeting yesterday as well, even before today's opening.

Um, I was, uh, chairing a session, uh, um, there and, and something he mentioned there is that Riyadh is actually the, uh, energy security capital of the world, and I think that really resonated with me.

And you had a, a few CEOs making comments around that as well, that, look, you can, uh, you can... y-you need to build the resiliency.

You can build a lot of, you know, tanks and, uh, pipelines and ships, et cetera.

But ultimately, there needs to be clarity, and particularly from governments around the world.

We've seen too much seesawing i-in, in a lot of, um, uh, government policies around the world, and I think the lack of investment...

Is this going to make any difference?

Should we stop looking at those prices then?

I think this is the challenge we've had, and I think this war has really shown, unfortunately, I guess, that there is no one price of oil, right? I mean, obviously, we've always known this as a physical market, there's shipping, but futures has always been a very good guide.

I was just talking to a few of my hedge fund friends earlier today, and we were having this exact conversation that while we have known this market, how they've traded this market for decades, simply changed right now because futures is probably capturing about 60% at best of that physical fundamental.

Perhaps as well, if you look at diesel, which is something we've been hopping about, gasoline and diesel both, usually crude used to capture 18% to 90% of that price.

Today, it's 50%.

And I think this is a paradigm shift.

And I just don't know how quickly we'll be able to go back to the old normal when the ticker price, what we've always been used to looking at, will capture the reality of the market.

Do we know what normal means, Amrita? I'm not sure I know what normal means.

Make sense here?

here?Yeah, absolutely.

Thanks.

Thanks for having me.

And, you know, this is what we've been t- telling our clients for some time now, that crude is poised to move sharply higher, and I think the biggest driver, of course, is escalation in the Middle East, like Dan has been highlighting.

But the pace of crude drawdowns in inventory has just been eye-watering.

Over the course of the last two, two and a half weeks, really since middle of August, we have drawn down over 130 million barrels of crude oil.

Yeah.

Your take on this, I guess, announcement of an announcement.

I would say, Brian, very, very skeptical because we've seen this before.

Remember a few weeks ago, there was a lot of chatter around some kind of framework between Iran and Oman and nothing came out of it.

If you read the statement, there are no specifics.

Of course, they talk about we need to come up with a solution for Hormuz.

That is absolutely, uh, something everybody wants, but I really wouldn't read too much into it.

Look, we've been on this downward kind of pressure for prices because some in the market were expecting a much stronger stance from the US with regards to the kind of economic ... pressures that they've been talking about, but the sanctions yesterday didn't really come to anything.

It's like, "Okay, we're gonna get a deal." It's a computer or AI reading this announcement and extracting some sort of positive tone, and that tells it to basically just sell the oil contract.

I think we do need to start right there, because, uh, a lot of uncertainty and questions about any potential deal that's coming together for transit in the Strait of Hormuz here, and of course heightened tensions and, uh, signs of conflict in the Red Sea too.

Yeah, absolutely.

And look, the challenge though we have in this market is that if you remember, we were trading above $90, right? And when these headlines started coming out of an imminent deal, apparently first by Tuesday, then Wednesday, then definitely by today, uh, we went down all the way.

Brent touched s- seven handle.

But now that we are back above because there's signs of complication again, we haven't retraced all the losses, right? And this is a sign I continue to see in this market where we sell off more on any prospect of kind of normal- I mean, normalization I say, but whatever the new normal looks like in Hormuz versus the reality of actual flows being quite constrained doesn't get priced in that high, right? So we've got this asymmetric price response, and like you also mentioned, we are seeing more, uh, Houthi attacks on kind of Saudi infrastructure.

And we have to remember that Saudi Arabia has really been the main source of stability of alternative supplies even when Hormuz flows were disrupted.

And yes, UAE's managed to get some diverted flows out, but if we are talking about disrupting that kind of 4 million barrels per day of crude flows, that is a significant tightening of balances.

Uh, so longer term, how does this, how does this play out, even, e- even if, uh, the, the bias is to the downside?

Let's start right, right there, your, uh, read-through on the situation, especially as President Trump yesterday basically said that, you know, he could have more massive attacks, more massive strikes coming on Iran.

Yeah, thanks for having me.

Um, look, I think the situation remains extremely precarious.

I was just in the region, got back this morning.

Um, I, however, think in terms of oil prices, people are just taking profits.

Quite a few new longs had come in.

Uh, this is always going to be the trend in crude in particular because, uh, the market understands the US administration's sensitivities to high gasoline prices.

I mean, the Red Sea piece of this, how critical is that, um, if you start to see those flows halted and more attacks on, for example, Saudi tankers in the Red Sea here? And I ask that because I know some of those oil flows were diverted, uh, from the Gulf and the Strait of Hormuz to exit through the Red Sea.

Why don't you think there's been a bigger reaction in the oil price? Up 6%, 75, but we're not at, at, you know, 120 levels.

levels.Yeah, I mean, look, this is a question everyone's been asking for a while, right? And honestly, just talking to some of the macro community and macro investors around the world, uh, the biggest feeling I get and I'm told is people are just disinterested in oil, disinterested in the energy sector.

Everybody's focused on AI.

Uh, and you know, the whole point is, oh, well, we never ran out of st- uh, stocks, which means there's going to be enough to, uh, go ahead with... and especially because Hormuz was reopened for, you know, maybe a month.

And I do think that's re- real placency.

The reason we managed to get out, uh, without having $200 oil prices is because China really pulled back.

Was it not for China, or had it not been for China, we would've seen some of those prices materialize.

Um, tell us how you expect that situation to resolve itself.

Uh, it, we perceive that despite all of the headlines, uh, the market is not overly concerned about losing more barrels of oil as this, uh, renewed tension in Iran plays out.

Yeah, I mean, look, to be fair, we have had some pretty significant move up, right, in the last couple of days.

I think today is taking a breather.

I think people are trying to reassess where this is headed.

So far, both sides have avoided hitting, uh, energy infrastructure.

I think that is very critical for the market to kind of figure out where this is going next and price, price the next leg in.

Um, I will still say, like you said at the start as well, by no means is Hormuz, uh, traffic back to normal.

You know, we read diesel prices up 11% yesterday.

Yes

... had given for Iran to sell its oil.

That's a big deal, right? We'd calculated about 130 to 150 million barrels of Iranian oil between all the storage and all the ships being available to the market quickly if the market kind of wanted to.

We hadn't seen that move as much because there was still sanctions and banking kind of insurance, uh, issues around kind of transacting, but that was definitely available.

And now you just know that it, the only country that can take it is China, and within that it's going to be the teapot.

So that's a big blow to the balances, and I think overall I would say this market has been so quick to price in the worst case, the most bearish fundamentals, and it didn't price in the record low stock.

So that's why what we are seeing now is a short covering rally.

How quickly, when we talk about that on something like a, a barrel of crude oil, how quickly does that change the supply dynamics one way or the other?

Is the China buying strike why so much Iranian crude is reportedly still on the water?

Yeah, absolutely.

Because, you know, this is the interesting thing that, firstly, none of our balance has had all of that Iranian crude coming out in the market, like pre-crisis or pre-war, I should say.

Now, of course, the U.S. has basically given Iran carte blanche to export, given the waivers.

And yet we continue to see banking being a real bottleneck because outside of China, nobody is really able to pick up as much Iranian volumes as Iran would like them to.

And I think what's very, very interesting in this is that European sanctions remain in place.

And this is something a lot of refiners, when we are speaking to them, continue to highlight to us.

Do we know why such a sharp change in demand over in China? Is it a reflection on just economic output? Is it a reflection on, you know, oil prices were high and so the Chinese have kind of adapted and figured out new ways of doing things?

Listen in.

I don't think we need Hormuz flows to go back to pre-conflict levels because we have alternatives, right? East-West Pipeline, I think the kingdom will continue to flow that even if it's not full rates, because I think the kingdom of all have shown that investing in redundancy actually pays off, right? And I think Prince Abdulaziz has been saying that to us, like, for a very, very long time, so they'll keep running that at a certain level.

Uh, UAE will keep running the Fujairah pipeline, um, even after Hormuz is open.

If anything, UAE's coming and planning for entirely getting free of Hormuz.

I think after two to three years the region will look very different, but even right here, right now, um, I think you could have Hormuz flows maybe two to three million barrels per day lower even if Saudis divert some of them back to Hormuz, um, and you don't need it because you've got those alternative routes.

Right

... than people have let on.

Uh, because for, for obvious reasons, right? And I think it's not an overnight thing.

The tankers are in the wrong place.

Half the tankers are here in the US.

They need to reposition.

Uh, tankers, the, the owners are still very cautious because of casualty.

... what's the, what, what's Amrita's take on the importance of Kharg Island?

Can you talk a little bit about the impact of the constraints around liquified natural gas not being able to go through the Strait and what it means for various products around that?

Yeah, and look, great question because the challenge we have with liquified natural gas is that Qatar, which is at the center of this, was attacked, not just like...

So this is not, say for instance, Iraq or Saudi Arabian, and again, having said that, Saudi has faced attacks as well, but not to the same extent as Qatar did, right? So there has been damage to Trains 4 and 6.

Having spoken to the operators, it does look like, you know, it could take anywhere between three to five years, but some of them said we may not even bring it back.

It's just not worth it.

We've lost about 85 million tons equivalent of natural gas or LNG as we would call it on an annual basis because of the shutdowns in Qatar across the board.

Now, some of the trains are starting up.

What would you say from an overall perspective is the biggest concern with some of the larger energy and commodity trading houses when you have discussions with them? What are they most concerned about here going forward as we sit here at the end of May 26?

Why then are prices still capped at this level, around 100 for WTI and 110 for Brent?

Look, that's a great question and something we do a lot of analysis on, uh, internally as well because you would think, given the scale of the supply losses, we should be potentially even double, right? Um, what we are seeing is, uh, record levels of destocking.

We did some analysis on this.

We did start the conflict with, with about close to 400 million barrels of excess inventory.

Um, and so we've run down, call it almost, like, half of it, but then we've also been drawing down SBR at record levels, right? So what we are seeing is that the market's in a massive deficit, but we really haven't gone into outright shortages yet.

We calculate that's about a month and a half away, so gives us till end June.

But what I worry about is that everyone, right, and I've been on the road for a couple of weeks now, everyone's hopeful that, okay, the straits are gonna reopen end of June.

H- how much higher?

How what is it going to take to actually see those prices come down in a more meaningful way? Is it going to be like a full opening of the Strait of Hormuz, an actual resolution to this conflict? Or is two ships, a handful of ships a day enough to to ease the markets in the meantime?

No, I don't think it's enough to ease the markets.

If anything, I'd say prices are not high enough, right? We're losing close to 12 million barrels per day every day.

Hormuz remains disrupted because production is shut in across the region and Iranian production is actually starting to come off as well.

So, you know, I'm surprised and remain amazed that the futures market continues to discount just how much supplies we are losing.

The physical market has, right? We've priced $150, $160 today.

And I do think it's a matter of time that the futures market catches up in terms of the flows.

And part of the reason that so many executives come on our air and talk about higher for longer for oil and other commodities prices and for getting supply chains back to a place of quote unquote normal.

... um, when everything was shut down during the pandemic and, um, we saw the reduction in goods being transported, we saw people not able to travel, what sort of demand destruction was that relative to what we need to see to match the limited supply now? If, if you have that sort of comparison, um, to, to hand or to mind.

It's, it's a great question.

I mean, we've been calling this the re-, uh, reverse COVID for a reason because there has just not been another supply shock of this magnitude.

The peak of demand losses we saw was April 2020, uh, for a month, which was about 20 million barrels per day.

So we are similar, right? 12 plus five, uh, right now, so, like, you know, crude plus products right now is about 17, 18.

S- very, very similar.

On average, the losses were about 13, 14 million barrels per day during COVID.

Is that enough? Does that tally enough, that shift, to explain how the markets seem less fussed about this spike in the oil price, or do you think maybe the im- the significance of oil is being underplayed there?

Following up on Dan's report, I guess the question that many of our viewers and listeners have is, what exactly does this mean medium to longer term for oil and gas prices?

Hey, great question, Dom.

I think the main thing, of course, the market's kind of sold the back end of the curve, assuming that UAE is going to flood the market.

But I really would exercise caution.

We've been in meetings in the region, and I think it's very clear.

And you heard UAE's minister say this as well, that they will be cautious about it.

They will only add barrels responsibly.

Is it that dramatic?

What do you think happens next?

Oh, absolutely, and I'm glad you raised that.

Look, we've been talking about, you know, oil prices averaging, you know, in the low 60s, uh, prior to the conflict for the year because we were expecting stocks to build.

And now we weren't nearly in the same bearish camp as some of the others who were calling for four, five million barrels per day of builds.

We were more in the one and a half to two.

But these are sizable builds, right? This was not going to be a market, you know, sure, not going to 30 or $40, but still $60 is a low price.

But now what we're looking at is a market where we have lost sustainable volumes of supply.

I mean, how would you describe, uh, the sit- situation in the strait if the president was saying earlier, you know, maybe we'll share the toll money with the Iranians or something like that? H- how will we know if activity is getting back towards normal? Does it matter if, uh, they or us or both are now taking a toll on the passage of ships through that waterway?

Amrita, I would love to get your sense of just how much has changed given the truce that was announced last night.

I think I completely agree with what Javier said.

If you read the statements, they're actually two quite different statements.

Uh, we're hearing from refiners and lifters who are trying to kinda get a ship in.

Uh, firstly, the cost is prohibitive.

You know, you're talking about more than $40 a barrel.

Um, even if you can get insurance, there's a huge amount of confusion with regards to whether they need to pay the Iranians, how they're going to pay the Iranians, because payment to, to be made to the Iranians is not easy given the sanctions.

Amrita, uh, you know, when thinking about the growth versus inflation trade-off, I'm just wondering, uh, have you seen any evidence of demand destruction in these last several weeks?

Is it, is it masking it? Does it typically lag? And how would you also characterize what the, the forward curve looks like as well? Do you think that's appropriately reflective of the longstanding issues we may see in terms of energy prices?

W- great question, and I mean, we've been debating this.

We've never seen the financial market and the physical market disconnect for so long.

Ultimately, they have to coincide, but maybe, you know, it's only at the time of expiry of a contract because that's when the two meet.

There's been a lot of intervention.

You know, there's been kind of ...

The volatility in the market has just made a lot of people take off positions they're just not able to hold.

If even if it's like a, a tail scenario, is it possible that we ultimately do see stability? Is there a measure that whether it's the US or Iran or some of the other allies could take that would ensure that the strait is stable and that, you know, trade can flow through there once again?

Is that right?

So we don't think the timeline is necessarily accurate.

And look, this is all new information.

We've got satellite data that shows, uh, definitely kind of some damage on one train.

The other one right now is inconclusive because of cloud cover, but fair to say two trains have been damaged.

Yesterday, we had also seen an attack on the gas to liquids plant, which would have also reduced, um, LNG production.

Clearly, there's damage that's going to take a while, could be months, even over a year, to fix this.

Quickly, Amrita, before we go, it's, uh, the, my understanding that even though we focus on WTI, it's West Texas, it's, it's the US benchmark, but it is the case that Brent, which has been much higher, we are showing that spread there, if Brent's around 120, a little bit off that now, that does influence our gasoline prices?

One, what are the signals that traders should be watching out for to judge where oil prices go next? And of course, I'm asking you to do a little bit of crystal ball gazing, but when do you see oil stabilizing?

Yeah, I think it's connected, right? Part of the reason why oil has jumped so much just today and on Friday is because traders in particular had this notion that oil is very oversupplied.

Even when I speak to our clients in India or the Indian government, that's true, right? We have been building inventories.

But the problem is these bills are mostly in China.

They are not in pricing centers.

And that's why the market has felt, quote unquote, tighter than what these balances have been showing.

And that's something we've been telling our clients for a while, that there is a mismatch.

Finally, Amrita, whenever the war ends, is there some impact of it that people are not talking about?

Amrita, do you share the point of view that this, uh, could now lend upward press- uh, uh, upward price pressure to oil, not just in the near term, um, but for some time?

Yeah, and, um, you mentioned, uh, LNG as well, just to highlight that actually Qatar, uh, decided to, uh, curtail its production not because of the attacks, to clarify.

There's been a lot of misreporting in the media.

It's because of the shipping constraints around the straits.

What's happening is that ships, many, many ships are going in and not able to come out, or not even being able to go in, so they have very limited storage.

It got tank tops, and that's why they've decided to curtail production.

It wasn't because of the attack, and that is something that's a genuine risk for oil as well, for the Iraqis, for instance, some of the other countries within the strait who are unable to divert production to other parts.

... supply shortages, and is there anything we can do or others can do to ameliorate that?

How do you see this influencing oil prices? Is this making you change your targets when it comes to WTI in any way?

No, I mean, look, I think, Frank, the biggest thing is that the 30 to 50 million barrel tweet was also without context, right? We have seen about 11 ships being chartered by Chevron to go over to Venezuela just over the last day or so.

So I think those flows will resume again.

It had completely halted over the last couple of days.

What I do want to stress is that those 11 ships are very much in line with exactly what the Chevron flows from Venezuela to the U.S. has been last year.

It's not additional oil.

The 30 to 50 million barrels could include those numbers.

But for the broader oil market, what does this really mean to have this extra capacity?

What do you make of that?

Well, Kelly, thank you for kind of flagging this to our clients over the last few few days, really, that initially I think a lot of the traders were very skeptical.

They've been asking us about how much more oil could come to the market because, you know, you could unleash so much of Venezuelan oil.

But we have been flagging that the U.S. blockade remains in place.

Sanctions remain in place.

uh venezuelan exports had already halved and there's more downside risk in the near term so in the near term there isn't additional oil in the market and the market was also extremely short our quantum have been flagging that the amount of shorts and brent are at a record high in 10 years the amount of longs and wti are also at a record low so because the market was so short so i think that's why you're seeing the kind of rally i don't think the rally is going to persist much because there is oversupply or fears of oversupply in the market But the right here, right now, the initial fears that there's going to be a lot of oil from Venezuela, I think that's dissipated.

So what do we do with all of those narratives now? Are they simply delayed or do you think they're called into question here?

Look, we've been saying right from the start that going into Venezuela and redeveloping it is going to be extremely challenging.