Amena Bakr on the Market Blindness to the 13 Million Barrel Shock

[MUSIC] Welcome back to another episode of the Oil Ground Up podcast. I'm your host, Rory Johnson. A reminder to hit subscribe and leave us a review. Any of any questions of us or any feedback on the show, please drop us a line at [email protected]. Oil Ground Up is distributed in partnership with the Clear Comodity Network at ClearComodity.net and also the Oil and Gas Global Network, the leading podcast network for oil and gas. Our guest today is a menabacher, head of Middle East, energy, and OPEC+ insights at Kepler and a very long time OPEC Watcher. And our discussion focused on the latest tracking of the Hormuz Crisis, the shockingly sanguine market reaction thus far and how political and industry leadership across the region is attempting to manage this unprecedented shock to their operations. [MUSIC] Amen, thank you so much for joining Oil Ground Up. It's a pleasure to have you. Thank you so much, Rory. So quickly before we get into the nuts and bolts of what's going on in the Middle East right now, could you just provide an overview of a little bit of your background and what you do at Kepler? Sure. Well, I started my career in journalism. I've been a journalist for many, many years, covering kind of the economics, but also the energy sector in the Middle East. I've covered OPEC for over a decade. I've worked for Reuters News Agency. I've worked for the National newspaper in Abu Dhabi. I've worked for energy intelligence for, again, about a decade there, covering energy markets. And I joined Kepler about a year ago. I'm currently heading up Middle East research with a focus, again, on OPEC. And kind of where the marriage between geopolitics and how that impacts the energy world with the focus on the GCC, and which I'm finding very, very relevant on where we are today and trying to make sense of what's happening. Yeah, and we're definitely going to loop back to OPEC, because I got to know you with your time covering OPEC at Energy Intel. But now the Earth Kepler, gotta start with what's happening in the straight today. We see so many numbers bouncing around from literally everyone with a terminal, kind of saying, this may ship, so this may ship, and so update us, what are we actually seeing? What did it look like immediately before the cease fire? What's it looked like since? And then what's it looked like since the blockade? Sure. Well, since the start of the war, I'll start there. I mean, pre-war, we used to see something like around 150 to 170 vessels across the straight on a daily basis. Now we're in the single digits ever since the war started. And we haven't seen any kind of improvement in that worry. In fact, I mean, we have a big portion of our team that are just on Hermos watch. So all they do-- I can imagine. Yeah. All day long, they monitor the vessels coming in and the vessels coming out. And there isn't much going on. Again, as I said, we're seeing the numbers are in the single digits. It's about 5%, 10%, a best of pre-war traffic. And I mean, we build our base cases on what's happening, kind of on the ground. The headlines, trying to make sense of the traffic. And our base case currently is that we're seeing maybe traffic normalizing by August. And that's what we're working off here. Of course, the situation remains very fluid, very dynamic. But yeah, that's our base case for now. And of that traffic that we've seen coming through the straight thus far, what portion of it is Iranian versus any other kind of nationality or background. And in terms of-- I know that when most of us think of Kepler, most of us think of Marine traffic, and most of us think of the AIS transponder tracking, could you give us a sense to what you know of the kind of swap between Iranian and non-Aranian and what we'll call kind of visible versus dark transits? Yeah. I mean, the dark transits are what we call the shadow fleet is the kind of tricky vessels to trap here. And that's what the Iranian fleet is basically composed of is. It's the shadow fleet. What they do worries, they switch off their transponders, which you basically don't see them. And then suddenly you find this vessel popping up somewhere else. So it's the job of our analysts and the team involved here. It's kind of truck these vessels and see where they initially started versus where they land. And a lot of it also happens, as you know, there are ship to ship transfers of oil between one vessel and another, which adds another layer of complexity when we're tracking Iranian vessels. But I think we've had-- we've been doing this for a number of years now. We have a good system. So when it comes to-- I mean, what happened when the war started, I would say the majority of the vessels were Iranian vessels. In fact, their exports didn't drop that much. We saw their exports last month around 1.8 million barrels a day. That's come off a little bit. So far, I mean, the average for April is around 1.5 million barrels a day because of the introduced blockade. And we've also had vessels, like what the Iranians call from friendly countries. So Indian, Chinese, but loaded cargoes from Saudi Arabia, UAE, Iraq. I mean, it's not the origin of the cargo, but it's the vessel themselves. And again, what we're hearing from vessel owners is that the permission to cross the strait happens when the governments of these countries-- I mean, India, China, and so on-- they contact the Iranians, and then they get permission, and then they're allowed. But when it comes to other smaller companies, IOCs, nobody wants to come near the IRGC. Nobody wants to communicate with them. And nobody wants to talk about a toll either. I know everybody's talking about that $2 million toll payment in cryptocurrency and so on. But that's not something that a lot of vessel owners want to disclose. I'm sure some have paid it, and they name it as something else as a facilitation fee, or whatever they want to call it. But it's very, very controversial. It goes against a lot of compliance issues to even the communication. I mean, IOCs just don't want to communicate with the regime at this point, and it's understandable. Yeah, because I mean, Iran remains a heavily sanctioned entity. So any payments to Iran-- this would all be in stark violation of this, so all of this stuff going on. So you mentioned August for a normalization of traffic is crazy. That's a very, very long time away. It's like the entire other end of the summer. So talk me through the way you see that base case progressing. What-- when does the straight even begin to crack reopen, if you will? How long does it take to clear the ships that are currently have been trapped in the Gulf for two months, 20,000 plus seafarers? When do they start leaving? How long does it take to get ships back into the Gulf? Because I mean, many of them have been re-rooted for instance to the US Gulf Coast. And I kind of talk me through the timeline of how that looks. Yeah, I don't think it's a very straightforward timeline. And I mean, we still don't know what the system is going to be per se. But just starting off with the backlog that you talked about, we have 800 plus vessels that have been trapped in the Arabian Gulf. And that's going to take maybe-- and I'm being optimistic here-- two months to clear that backlog. So that's still a long time. And that's presuming that we don't have minds in the strait. That's another element there. So-- Particularly topical this morning. So I mean, I think everything should be timestamp now. So we are recording this just before 11am, Eastern time on April 23rd. And this morning, there were as opposed from President Trump around how he was going to shoot and kill any boats that were seeing kind of laying minds in the area. So sorry, I ain't Trump, you but I just wanted to timestamp that for reference. No, no, you're right. And we should mention that. I mean, just the mention of minds, whether they're not the threat of being there, that's enough to keep any vessel owner away from the normal passage going through the strait and the kind of-- the normal passage that they used to take. Because we're seeing also unusual ways that vessels are traveling through the strait of hermos. One is called the Iran Lane, where they need to come very, very close to the Iranian coastline and keep their AIS on and have constant communication with the Iranians. They're kind of being guided through. And one is through the Oman Lane, again, coming very, very close to the Omani coastline. And they're not using the traditional kind of in the center passing through the strait, which raised that question around minds, where are the minds? Are the minds traveling? Do they move? I mean, I'm not a military expert, but I could tell you. I just spoke to a few people. And the thing that what they were saying is that they could compare it to what happened with the Iraq War in the '90s. And it took around six months at the time to clear-- those mines from the water and they destroyed three vessels during the 90s. So if you add that to the timeline, we need another six months to clear the mines. So that kind of pushes everything back. But let's just assume that there are a few mines that can be taken care of less than six months. We would need two months to clear that backlog of vessels, maybe. And then if you go back to, I mean, there needs to be a system on which vessels exit first. That's still unknown. What priority will be given to a certain country or the ships that have been their the longest or depending on the cargo of origin, that system is still unknown. And that system is something that even the national oil companies are asking about and they're trying to put in place. And that's something that I think maybe the international community can help with. If you have countries like the Europeans and so on helping with this organization, maybe that would help create a system around, you know, first clearing that backlog and then resuming traffic as as normal. But it's going to take a long time. And we didn't even talk about the shutdowns that happened in the Middle East and restarting that production to get more, you know, output out. Well, that's exactly. And so then, so that's the question of getting the currently trap ships out of the Gulf. But in order to restart production, roughly 13 million barrels a day give or take shut in across the six non-Aaronian Gulf states, in order to do that, you need new ships. You need unladen tankers to enter to enter the straight, enter the Gulf and unload. First, probably the, you know, the inventories that didn't build up initially by these, you know, after that the straight was closed. But then you also need to kind of get more and more empty tankers in there to provide the egress capacity, essentially, for these producers to turn back on production. So how long does it take to get all of those ships now that have been kind of scattered to the four wins, you know, follow it, you know, they weren't finding any work in the in the Gulf. How long does it take those to get back into the Gulf? And how long does it, you know, after that? How long once that first tanker say begins reloading in Kuwait? How long after that point could we expect restarts to begin? And then how long in your mind, do does that restart process take? I think, I mean, it depends on the country really when you're talking about restarts. For Saudi Arabia and the UAE, I think the restart of production or the production that they shut in can come back relatively quickly. Some of the wells in Saudi Arabia even can come back in a matter of days. So let's just say, you know, in a few weeks, we might see a normal flow from the UAE in Saudi Arabia. But again, it will depend on, as you said, like these vessels are trapped. They need to get out first, unload and then come back again. So we can say we can forget about this year. This year is a really tough year. And I think challenges will remain. And we got a kind of glimpse worry from Chris Wright when he said he was talking about gasoline prices. He got in trouble with Trump saying this. And so yeah, he got asked about it. And his answer was that, yeah, maybe we'll see, you know, prices drop by the end of this year, but may next into next year. So this problem we're definitely going to carry it into 2027. So that's the length we're talking about. If we're in almost at the end of April now. So December, January, that's when maybe things will start normalizing again. For some countries, I mean, we're talking about Iraq here, Kuwait. Even, I mean, it depends what happens with Iran, but if the conflict escalates or not, if we get more damage to their energy infrastructure, but these countries need months to recover their production. We're talking three to four months at best to reach those pre-war levels. So this year is going to be tough. And I think the beginning of next year too. Yeah, so one question I am frequently getting is kind of what what damage has been done to these upstream assets. And I would say that in my answers generally been very frankly, we're not going to fully know until they try and turn everything back on. We do know, however, there has been notable damage to a lot of downstream infrastructure, refinery, petrol chemical facilities. From your lens, kind of of that say roughly 13 million barrels a day. Do you think any of that portion has been lost for longer than say four months? It's really difficult to say, Rory, and it's been incredibly difficult to get information on the ground here. As you know, a lot of these companies aren't saying much publicly, of course, but even privately, there has been kind of a cap on the information. And a lot of people are getting in trouble for even asking for information. So it's a very sensitive topic at this point. But I wouldn't say it's completely out of the question to think that some of this production is going to be offline longer than four to five months because of damage facilities. We know Bahrain, for example, they need a lot of help in preparing their refineries, their assets there. And the same thing with Iraq, they might take a little bit longer Saudi Arabia. I mean, they're quick at bouncing back, even with Chores and Manifa when they got damage, I think was the first day of the ceasefire. They managed to bring that back in the East West pipeline is back again, the UAE the same. So it's a bit uneven. I even saw, I think, Ristad put out an estimate there that these countries need about $50 billion collectively to repair their energy infrastructure. I think it's to put it's premature, as you say, to kind of put numbers around it because we don't know. But with Qatar, I mean, kind of a chunk of that is that 20 billion is the damage done to its LNG trains. And they said they came out quite openly and said it's going to take us five years. And worry, this year, that takes around 6% of LNG supply off the market that other countries need to source from elsewhere. So the longest time I've known you, you've been kind of what I would call an OPEC watcher. We watch the meetings, we watch the politics. And I think on top of this being kind of a military and kind of geopolitical event and crisis, there are also kind of deeply, deeply tricky politics in the region kind of coming out of this. And I think going into it. So I think going into some of the politics here, I want to first talk about you had mentioned the Iranian Lane and the Omani Lane. And I would say there has been, it's been very fuzzy. The degree to which Oman and Iran are collaborating with any of this. If this is just comments coming from the Iranian side, there have been multiple moments where people have talked about and Iran, Oman, kind of proposal for GoFullward management of the strait. And I know that this is going to be, you know, anathema and kind of nails on a chalkboard to many of the GCC members. But before we get to their reaction, how is this even being thought of between Iran and Oman? Is there a pre-existing view that the strait was kind of a joint asset that was kind of not, they weren't allowed to manage, because it was an international waterway. Can you talk to me a little bit about the history and or the GoFullward sentiment around that bilateral relationship across the strait? Sure. Well, I'll start off with the fact what you said initially. This is an international waterway that shouldn't be managed and you shouldn't have a toll on it. And it should be open for all vessels and it should go back to that. We shouldn't have a new system whereby Iran kind of takes the world hostage here and manages the strait or, you know, imposes a toll on the strait. This is something that's not acceptable by the international community. It's not acceptable by the Gulf. I don't think this is something that, you know, will will will be accepted at all. And it needs to return back to what it was. This is not like the Suez Canal in Egypt. This is an international waterway. However, given the fact that, you know, you have the coastlines of Oman and Iran, you know, just around that the strait, there was an understanding that both countries have some form of responsibility in making sure that vessels pass through safely. And, you know, they've maintained that kind of level of communication. Even after the war started, I mean, Oman initially, Oman was the Pakistan, right? They were the mediators. They tried to bring everybody to Muscat, but that meant, I mean, everything kind of fell apart. But I would say the confidence is still there between the Omanis and the Iranians and there are lines of communication. But one thing I want to mention, worry that I kept hearing is that it's really difficult to keep up with the, I mean, communicating with the Iranians at this point. You imagine that it's very, very challenging. They don't pick up the phone. It's not like, you know, it's open communication. There are security concerns. And many of the times that the Omanis want to relay a message to them, or even the Pakistanis want to relay a message to them. They have a problem. Like, many of these people went underground. It's very hard to reach them. And that's been a common complaint that I've heard between the mediators, and it's hindering just communicate. passing on messages and that's probably going to last until you know the things normalize. So just Oman's position amid the Gulf countries, of course there's friction. I'm not going to say that there isn't friction there. I mean especially in the UAE you saw, I mean the UAE was the most attacked out of all the countries, even more than Israel. Right? So rightfully here the countries leadership said anyone who attacks us is the enemy and any view you know communicating with the enemy again it was you know taken with a lot of sensitivity. But it's also I mean I think it's understood that you need to keep open communication with your neighbors even if it's a really bad neighbor. But you have to keep that line of communication open but Oman is yeah it's it's always been in a very unique position. It has a historically neutral position compared to other Gulf countries and that's why it always like it played the role of the mediator. We'll be right back after this short break. In mining the difference between a good project and a great investment often comes down to one thing visibility. Terra Hutton is a Sweden-based mining investor platform built to make the invisible investible even the strongest project can be overlooked. Geology is inherently complex and data heavy and when it's reduced to raw numbers like drill results and technical reports. Investors can miss the story and companies can miss out on investments. Terra Hutton brings mining projects into the digital spotlight combining data narrative and context in one place. So investors can see not just what a project is but why it matters. Whether you're evaluating early stage exploration or more advanced development assets. Terra Hutton helps turn complexity into clarity and information into insight. The kind of transparency that builds loyalty over time. Visit terra Hutton.io to learn more. I'm Rory Johnson, host of Oil Groundup and founder of Camardie Context. If you enjoy how we're all about digging in and providing more context here on the podcast, you'll love my newsletter research service Camardie Context. Subscribers can expect a mix of real-time event analysis, data reviews and deeper thematic research as well as the Oil Context weekly marker report every Friday. If that sounds like your kind of edge, head to www.camardiecontext.com or find us on substech to join for free or go deeper with paid. We're offering Oil Groundup listeners an exclusive 20% discount off their first full year subscription by going to CamardieContext.com/roundup. And now back to my conversation with a Metabucker. I'm going to get to the golf countries in a second because I think they have a unique perspective on this, let's just say. But before we get there, dipping into Iran for a second, I think there were disagreements, there were negotiations going on with the United States prior to the war. And it was a failure of those that kind of led to the war prior to the crisis, prior to the closure of the straight-up form moose. Iran had always talked about her moose, it had always talked about a threatened, you know, this is, I mean, I actually, you know, if you would ask me three months ago, if Iran was going to stray the course, pose a stray from it, it was said absolutely not. Because I had heard that every month basically for the past 12 years I've been in this industry, right? And with the assumption was always like, no, of course not. And now frankly, I don't think what I really got wrong was I don't think I ever expected a US president to attempt to call such a big potential bluff and it kind of blow up on them. But prior to going into this, Iran had never, like one of Iran's demands was never a recognition of control of the straight. It was always like, it was a threat that it would do something, but it wanted sanctions relief for domestic enrichment or whatever. But now I think at the beginning of this crisis, if you would even talk to like the first week or two, Iran's main goal was regime survival. Like that was, you know, end of sentence. They just wanted to basically, yeah. Yeah, and then they wanted to get to the other side. But now this long end, this deep, like it feels like they want to get something out the other side. And this is why you started pushing for some kind of recognition on the straight or whatever. How do you think now about what Iran wants out of this? If at this stage, it's, you know, Trump is essentially unilaterally extending the ceasefire to, graciously, kind of willy nilly, like it's kind of like a ceasefire that is a ceasefire, but it's still going the war is not back on full. But Iran is not budged to reopen the straight. Now they're saying that they want the blockade to drop first before they even returning to the ocean. Anyways, it's all over the place. What do you think Iran wants now? It was exactly like you, since I was 20 years old and you know, they used to give us case studies of her moves, closes, shuts down. What happens to the world economy? How do things react? And there was a textbook answer for that. I was told to write that textbook answer and let, and if I don't write it, they, they fail me. And the textbook's answer was that if the straight does close, you would have immediate action from the international community and the US Navy and they would unblock the straight and it's impossible to close the straight of her moves because it doesn't have a gate and you can't close the straight ever. It's never been closed ever. It's never been closed in history. Exactly. So even in our minds, it wasn't closed and it could never close. So that was, you know, something that I think shocked all of us. We just never saw this coming. And now I'm beginning to realize it's not just about, you know, it's about the fear of crossing the street. They don't have to do much. They just have to tell you, okay, there are minds and you're not allowed. I mean, and they're going to fire guns at whatever vessel and it's just all down to sentiment. And if the vessel owners don't feel confident enough, they're not going to cross. If the insurers don't feel confident, they're not going to cross. They're not going to give insurance to the vessels to cross. So it that reversing that sentiment. I think that's going to take a lot of time. And the Iranians realize that they have huge leverage here. They have the entire world at their mercy. And I'm even surprised it's taken this long. And we can talk about, you know, and I'll ask you why oil prices haven't gone, you know, to 150 or 200 dollars because that's again the textbook answer. Yeah. Well, what if this happens, where would oil prices be? So why aren't we seeing that? Why aren't we seeing this level of panic? Clearly, it's huge leverage and they want something for it. And what do they want for it? They have the 10 points that they gave to the US. I think they still want to, they don't want to forfeit their right to not enrich uranium domestically. They want their nuclear program. They also want compensation. They probably want a tall system around the strait. You know, they want to control the straight for years to come. Which I think a lot of the region here is beginning to realize and everybody's going with the plan B now. And starting, you know, to rethink about all these pipelines that they can build. Some of them already exist, like we already talked about the east west pipeline and Fujera and so on. But how could they expand on that and how can they, you know, have contingency plans? So the region here is making plans for that scenario where you are going to have forever restricted flows from her moves or you're still going to have an Iran that wants to control the straight of her moves. So, and I don't think they're going to let go of those demands unless we see a level of escalation that goes over and beyond. And I hope we don't come to, I mean, I was always fearful whenever President Trump mentions, you know, what happened in World War II. I just the crazy thought in my mind, I'm like, I hope it doesn't come to that. Yeah, yeah. So, yeah, there's a few too many genocidal tweets coming from the president for everyone to feel comfortable. I think that's that's a, that's a, that's a given a situation, for example. Yeah, the tone of those, I've never seen anything like it. So we just don't know what's going to happen. So we're going to get to the market under reaction next, but before we get there, and I'm happy that I just published pieces this morning kind of attempting to steal man, why the prices aren't higher, but we'll get there in one second. I also want to talk about the GCC states and particularly Saudi and and Roddy views, because I think there's been a bit of back and forth as to what it felt like or at least what was being published publicly. But what their view for this war was I think going into this war, there was a view for a long time in the Saudis had warmed up. relationships with with Tehran, you had this kind of daton, like there was there was warming relations after you know decades of animosity. And that there was this initial view particularly following like the 2019 attack on Abkake, that the Gulf States knew that they were in the direct line of fire should a war ever occur that that you know Iran can't hit US territory, but it can hit oil facilities in the Gulf and that's the leverage. So at the beginning of this going into this there was always the presumption that if there was pressure coming from the Gulf States towards the White House, it was that the pressure was essentially like pulled up like consider your actions like don't get too far here. And then there was a period where everyone was being attacked and I think everyone was kind of legitimately and I think you know understandably outraged in that moment, but then there's been some waffling about what exactly the view is and I think it's different between different members of the GCC, but you've also seen kind of for instance this view that like if we're in this far, finish the job, but there's also this view like I would say generally and correct me if I'm wrong, the view increasingly to me feels like the countries that are hit absolutely hardest by this, Iraq and Kuwait, at least from their oil view, they're kind of like open the straight no matter what I don't care if I have to pay a toll, I don't care like just open the straight, we're like literally contracting a third of our economy and an annual pace here. The Emeraldies and Saudis, wealthier countries, wealthier governments, a little bit more buffer room, have had more rerouting capacity, you know they're not quite as under the gun as Iraq and Kuwait and they're kind of set and at least what I've seen publicly and again you're closer to these principles that I am for sure, that it's a little bit like don't leave us in this limba, like don't leave us in this state of like when there was a discussion of like the unilateral taco, where Trump would just like basically pull out and leave a rawn in control of the straight and say like you know that's it, we're done, there's no more bombs but like deal with a rawn yourself and they're like no no no no no no no that's insane, like it's untanable blah blah blah blah, but like talk to me about what your perception of the view is and how that's changed over time, like who wants, like is there or is there still a split between the members that you know some would be, because again like a a toll is illegal intolerable, etc, etc, etc, but it's also better than the straight being closed indefinitely, like a two million dollar fee, however exorbitant, however extortionary, is you know pocket change for a VLCC, you know, etc, etc, etc, so I'm just curious into how you're thinking about these governments and if there's any splits in their view, but where they want to see this at? Sure, I'll start off with a very personal view of Rory and being based out of Dubai here, and since the beginning of the war till now, I had in travel, I was here in Dubai and if you tell me let's go back to you know when we had attacks on a daily basis and intervals of like every 20 minutes we'd hear a blast outside and just by the way the UAE did a fantastic job at interception. A lot of the sites that were targeted by Iran, there are civilian sites in addition to the energy infrastructure, but a lot of it was civilian sites in terrorism, in the true essence. Absolutely horrible and horrific, and I'm thankful for all the interception and the brave men and women of the UAE that really, they took care of us all. So would I want to go back to that time and have that happen? Absolutely not, just as a resident here and I'm sure many people feel the same way, but at the same time if you just think maybe more strategically or on a kind of leadership level and I'm not here attempting to guess what they want, but just to you know what has been said publicly, especially from the advisor of the president on what Gurgersh through his commentary and so on is that Iran is a you know still a hostile state, a hostile neighbor and it's going to be very difficult to deal with this regime and I'm sorry when president Trump says that this is a regime change, nothing changed or nothing changed. They killed the dad and his son is more hard line than his father. Okay and we have all the the negotiators that were sent to Pakistan. These are not like you know different people. They are hardliners and just it's not a different group of people. There is no regime change and being stuck with that same system here is a great concern to the Gulf countries and they'll continue being under threat for for the longer term. So I'm sure they want to see some change happen. But regime change is Iran is not like regime change in Venezuela and by the way just before I just before the war started I had a kind of internal bet with myself that the war would start on the 1st of March. It started to date earlier. So I will wait way off and then away off 24 hours later. So I made sure that I was back I mean just in time. I was in Venezuela. I was in Caracas and I met with president Rodriguez and it's a completely different situation there. I mean it was just insane to even compare the two countries in Venezuela and I think that's what you know president Trump got wrong. He thought you know okay yeah it's a small excursion 45 weeks. I'll wrap it up and it'll all be fine. But he is dealing with a regime and people who just have different sets of goals and different I mean if they die it's called martyrdom. They're not you know they're not afraid of death. They're not afraid of loss. They might even have nothing to lose compared to all of what we're seeing. I mean the countries in the Gulf they have a lot to lose. They have plans. They have visions. They have investments. But with Iran I mean it's it's ideology that controls the country there. So they're fighting on a completely different level and they don't mind this is what what's concerning to me personally is that they want to drag this war. They don't mind you know overplaying their hand in negotiation and that's what they do best. So having this thing drag for longer and her moves shut for longer that's that's something I mean a great concern. And when again when Trump said I'm gonna leave the US isn't using her moves you guys take care of it. That's when I think the phone calls started right and then they started telling him okay no you're not gonna you know leave us and you have to clean up the mess here and that's where he got more involved than the idea of the blockade. I've even heard a view of like why didn't he do the blockade earlier why now it should have done it should have been done way earlier. So as much as I think that some countries would like to see more flows through through her moves having some form of change in the longer term in Iran is again might be the wish of of other states to ensure that you know their their long term plans continue and not under the threat of an aggressive Iranian regime. Yeah and I think I mean they've already dealt with this much pain like again if you've dealt with this much pain you kind of want to get something out of it on the other side. And I think to your point as well like why didn't the blockade start earlier. Same question I think like you know again if you would ask me three months ago would it would a wrong close straight from his I'm like absolutely not if a wrong close straight from his with the US Navy sitting in like the Indian ocean just waiting there would the US Navy allow them to continue exporting 1.8 million barrels a day in the hands of them of course not we just saw them enforce a blockade against Venezuela in December in January like this is they know how to do this they can do this it's not like it's well within their ability they suck it wrong in going through you know Rory it's like a it's like a big sieve not everything is you know really being caught they you still have the the odd vessel going out and Iran still has you know jask for example you know they have storage that they could use to to keep their ex so in terms of timeline I mean yeah they they have again a bit of leverage here to to keep things going okay so I want to talk now about the market under reaction and then I want to close with some op-ech thoughts from you so on the market under reaction so the piece I published this morning basically made three arguments because I think again eight weeks into this or most has been closed if you had asked any analyst kind of where oil was going to be it would be above a hundred and two dollars and 44 cents were prompt Brent is trading right now which is high relative to normal pricing but not or moves crisis level so the three arguments I made were one I think I have in some ways violated my own cardinal rule which is to say that the oil market I always argue the oil market is not that forward looking it only can realize stuff and I think you know you've seen Jeff Curry I think put this in the framing of commodities are not anticipatory assets but you need to wait and realize the tightness so and I kind of propose a thought experiment like let's say it's let's let's abstract away from the hormones of it all because I think hormones is a particular narrative geo-political weight to it let's just say it was a 10 million barrel at a pipeline that suddenly went offline and we don't know when it's going to go back on but all we know is it's really important and surely it can't be offline forever. And going into this crisis, we had relatively high stocks. You know, we had been building inventories, you know, you know, the overall sentiment was very rare. There seems to be talk of a glut, right? Remember? Yes, yes. And I was very frankly, I was a glut observer. I believed in the glut. Maybe, well, it's funny. Just, you know, inside. You shifted from there to, yeah. To very ball. Yeah, and people are like, I was saying so many people have gotten to know me now through this crisis as like an alarmist crazy ball. Right. But most of my life, most of the time I'm assuming you've known me. I've been kind of, you know, the opposite ends, right? We've been fighting. Exactly. We're 100%. 100%. The first time that we're aligned. Exactly. We're just naturally wanting to have you on the show now. But I think that, so with that in mind, the inventories, I mean, this is all been said kind of at nausea, but I think just to reinforce, like it took time for those shortages to arrive at shores. We're only now beginning to see inventories draw down. I think the macro market has seen alarmist oil folks for a very long time. And it's like, oh, it's the boy who cried wolf. Like forget about it. This is, this is just like 2022. And I hear that all the time. Like, rule number 22, everyone panic. And we ended the year lower than when we started. Like, is this not the same? I'm like, for a whole bunch of reasons, this is absolutely not the same. But let's just take it for it. Let's, let's take it for its word and say, sure. All that basis, I think if we just look at realized OECD commercial inventory draws, if I and I had modeled for purposes of this, basically a 4 million barrel a day net draw, an OECD commercial stocks in March and April. We don't have official stats yet. Let's say that and then it kind of goes up to 5 million barrel a day in May and June, assuming this closes on that basis, around $100 Brent with around $20, $30, $25, kind of three year back, where nation actually fits within the modeling historically. But if you hold that same thing forward from March, May and June, that's when we get very close, very quickly up to $200 a barrel, fair price realization. So I think it's one of these things where, okay. But does the market look forward at all? I think the other thing spoiling this natural look forward is the jaw boning. And I think, I think this is- Absolutely. I think this is- I think the puzzle here that, you know, that's messing everything up. And I think, yeah, I mean, every single time we've seen at least a half dozen episodes where President Trump has either post something on true social or kind of, you know, said something to media in the Oval Office that has triggered a $10, $15, $20 barrel intraday to client prices. And it's really risky for people. Like, I don't trade futures. But if I did, if I was holding Brent at 110, would I be comfortable? I don't know. I actually think more likely, empirically, the risk is sharply to the downside. Maybe we grind higher. Before we dump $15 a barrel, I think all of that together helps explain why prices are underreacting and we're kind of needing the physical market to kind of drag us by the nose higher. How do you see it? Like, how are you talking about it? How are the people in industry? I mean, again, these are people that I've like the most at stake in price formation. I'm assuming they are also surprised at the prices at stands. Like, how are they talking about it? And what types of things are they saying? For the longest time, Rory, I've heard many people here in the Middle East region talk about price manipulation. And I used to dismiss it. I'm like, what are you talking about price manipulation? That doesn't happen. That's illegal. You can't tip off a bank in Wall Street. I mean, I've been like, you know, completely dismissing these comments for years until today, or I'm actually seeing this happen and being realized in front of our eyes stories every day, Rory, about, you know, people who've made millions and dollars 20 minutes ahead of an announcement. So that's being, I mean, that's just happening repeatedly. And I even know people that they receive messages like, okay, get prepared. There's going to be an announcement to retweet or just position yourself. It's happening. It's real. I've seen some of these messages. So manipulation is happening to a great degree. And that's what's kind of distorting for what we know. And, you know, barrel counting doesn't, I'm still, I mean, insisting it matters. It really, really matters. It matters. Amen. It's going to hit us at some point. I mean, reality is going to catch up with these prices and reality is going to catch up with our lives, too. Right? So we're probably not going to be traveling this summer. You're probably not going to have gasoline in your car. We're supply chain wise. I mean, I'm even hearing in hospitals, they're having issues, you know, booking people for MRIs because, you know, you need helium for the MRI machine that's not coming from a clippet. I mean, it's just impacting every single sector. And that's the reality of the situation. Maybe it's impacting countries that we consider as we don't live in these countries or developing countries more than developed countries. But it's coming. And that's going to catch up with us soon if the situation remains unresolved. And the price, I agree with you 100%. Yes, we did have some buffer of inventories that maybe are, you know, helping cushion some of this. But that's wearing off really, really quickly. And we don't have enough spare capacity in the system to make up for all of these losses. And I don't care how many vessels re-reward to the US. We're not going to be loading these missing barrels, despite, you know, trumping, very happy about it. And, you know, you must be a winner. And I see that she's even extended the waiver for Russia, you know, for the longest time. Yeah. After two days prior, Bessent saying, no, we're absolutely not going to extend the waiver. And then, uh, voila, the waiver extended. Right. I mean, where's the supply going to come from? So I think, I mean, I agree with you, a major, major underpricing of what's happening in an underestimation of the situation. Yeah. I mean, and you mentioned like the US tanker, like the flow chilla of tankers heading towards the US Gulf Coast. It's always be a special memory through this, through this, through this episode. But, I mean, the thing I keep stressing is like, it's not new supply. It's not, they're not new barrels. So it's exactly how we should expect the market to attempt to bridge an arbitrage and spread out the pain because right now, US and more broadly North America is now the most energy secure place on planet Earth. Um, but the only reason you have tankers going there to get the crude is because other places in the world are now paying willing to pay much more for those barrels than North Americans are, right? It's going to drag all the prices up. I get it. No one is, no one is safe except maybe, maybe, maybe, you know, you know, you know, you know, maybe, maybe if you're like in the Chicago area of like the mid continent and you're just like sitting pretty with domestic refineries and captive Canadian crude, but that's the only people that are safe. Everyone else is not safe. Um, right. I have a question for you. Just, yeah, in terms of like sentiment in North America, um, what's the feeling? Are people complaining or are people like alarm that, you know, you might get higher prices or what's the feeling generally around around the war? Because I've heard from friends in the US that it's, uh, to them, maybe just a little bit of a video game. They're watching it from a distance. Um, and they just don't, you know, it's, it's kind of like a movie. It's surreal and they don't realize the impact of it. Yeah. I would say that there is a deep level of, I don't know, misunderstanding or just lack of awareness of the crisis. I think people are beginning to be aware that prices are higher at the pump, uh, but also those have rolled over a little bit, right? And I think that, you know, the, the delta and the momentum here is now playing towards, okay, this is over. This is getting better. We've even seen data at Brent roll over from its all time high, right? Like, there is optimism. Physical traders can be optimistic as well as financial traders. Um, and I think that is, like, that is informing the sentiment. But in general, no, we're not seeing shortages here. And we will likely be in North America, like the last place in the world to see shortages, uh, both given both heavy domestic upstream supply, refining capacity, you know, all these barrels are going to be incentivized away from our shores. Uh, but in general, no, I think that it's, it's the first time since early COVID that I remember like, I don't sure you remember this as well, like January of 2020. And it's like all the oil folks are like, wait, what's going on in China? Like there are flights and like, you know, flights are cratering, you know, like, but in Toronto, like, like, there's like any other day, no one had any clue. And it was one of those things I'm like, oh my god, this is, this wave is coming and no one knows you're like, looking at the families at the gas station. And you're like, oh, all if they only knew, um, and it feels a lot like that today and like a very disconcerting way, you just want to like go to the end of the shake. They're like, save yourself. Yeah. But no, you know, I think part of a problem is, uh, Rory is that, I mean, by all, um, the estimates that I've seen so far, uh, if we talk about demand destruction, it hasn't happened yet. And I haven't happened yet on the scale of COVID, for example, where we saw like 10% of, uh, demand being destroyed. So we're not there yet. We've seen, I mean, to, to, to the average person, it's like, okay, I've seen the worst. We've been through COVID. This is not COVID. This is fine. This is reversible. So maybe that's part of the, the psyche to on, you know, what's impacting the price. I think demand destruction is also a really interesting thing through this crisis because I think demand destruction means a lot of different things to different people. Um, historically, I've talked about it in two main ways, uh, price sensitive demand destruction. So like, price. price of the pump or high, so maybe I'll take the bus, or income sensitive, income elastic demand destruction. So like high oil prices cause a recession. I lose my job and I don't have a job to drive to, so I'm not driving, right? I think those are both the ways we normally think about it. I would say that we are already seeing reports and we saw this inside the conference and some of the trade houses talking about how much demand destruction we've already seen, particularly in Asia. The challenge I have with those estimates are it's too soon. It's too soon for this to be real demand destruction because what you're seeing in those cases is very weird thing with, right? It's reversible and it's like postponed or kind of foregone demand. They want to demand it and they're willing to pay higher prices. There's just no physical barrels available and it takes time for tankers to close these gaps to kind of fill out these holes for those US bound tankers to end up where they're going. I said that weird thing about this is that you know two months sounds like a really long time. It's been forever and I'm sure you're exhausted as I am. I'll move out, yeah. Right. But you really only have like one tanker, one and a half tanker cycles move through this process. It takes a long time for this stuff to clear. I think that's the other thing is that headlines and tweets and true social posts move much, much, much faster than barrels can actually shift around the planet and given how concentrated the shock has been, Asia is just like literally without barrels but they're bidding for everyone to get their own analysis. With that, I think the last thing I want to touch on is OPEC and I think this is where I think we have chafed historically on some of kind of interpretations of OPEC strategy and kind of what they were doing heading into this crisis. But I do think like definitively this does change things, right? Like prior to this, they were increasing production into a buying market. Like demand was actually not that bad, but combined with OPEC increases and non-OPEC growth, like we were in an oversupply situation and it was largely being driven by those OPEC increases. You can dispute later if you'd like. And I'm going to turn you into an OPEC fan at the end of this story. All right, probably. To be clear, to be clear, I've always been a very, very strong, oh, here, this is my man at the moment. I've always been a very, very strong proponent of OPEC and a market manager in the system. I was worried that in attempting to soften volatility from let's say 2023 through to end 2025, they had overdone the cuts and kind of introduced a very predictable kind of downside shock on the other hand, which is that was, that's my main criticism was like, they a little, they tried to over correct supply in 23 and early 24. And I think they just set up a predictable backslide, but all this set now on the other side of this, one thing that's been interesting and one thing I think no one's really noticing because well, who cares about OPEC right now? Well, who cares about OPEC policy right now? Because they're all behind hormones. But they have actually been continually every meeting. They've been increasing by what was it? Like 203,000 barrels a day. So 50% faster than their prior planned increase or at least guided increase. And that those quota increases continue to accumulate over this period. Talk to me, so like on the other side of this, let's say it's June or whatever, like they are going to, quotas are going to be six, eight, 100,000 a million barrels a day higher than they would have, than they would have been going into this. So you're not just going to see OPEC and OPEC GCC members in particular bounce back to their free war levels, but their targets will be higher. So talk to me about how one, to your knowledge, how OPEC in these discussions has been dealing with it because obviously increasing quotas in a period where everyone knows you can increase production is weird to a degree. But I think it also makes sense to keep you on their path of normalizing production restraint. But talk to you about what OPEC's thinking in this moment and how they're strategizing through this next kind of year or even six months of what this is supposed to look like. And Groey, in a world of madness, in a world of unpredictability, in a world of crazy tweets and headlines and so on, you need a kind of a sense of structure. And this is what OPEC is trying to provide with the market, a kind of steady hand on the wheel and a predictable one. So that's why they've been continuing with their meetings at their set times, going ahead, adding those increments slowly unwinding the cuts. So it just adds kind of a layer of comfort that they're going to keep on doing. It's just business as usual. It's normal. Sure, they can't produce those barrels. As you said, everybody is behind her moves. A lot of these countries are trapped behind that and shutting in their production rather than unwinding cuts. But on paper, they want to give a sense that they are ready to go back. There's a system in place. There's a quota. So when the time comes and this situation, they can't control the geopolitical situation. No one can, right? But when that resolves, they will go back to that mechanism and they want the market to have full transparency on what the mechanism is, what the quotas are, and their ability to kind of bounce back from this. Another tricky part, worry, is that you have Iran being part of this group. They're not part of the eight members deciding on the unwinding of the cuts. They're outside of that and exempt and so on. But Iran is a member of OPEC. It's a founding and member of OPEC. And there are always questions around, okay, how are the GCC states going to react to that? Are they going to kick Iran out? The answer is no, because this is not the first time you have members fighting each other. You had Iran and Iraq. You had Kuwait as well and Iraq. And they've all stayed in the group, but it has a kind of interfered. Sure, geopolitics is always going to be a component. We can't ignore it. It does get involved. But they always, I mean, at least formally, they say, we separate between, we look at the markets and then geopolitics is left out and they're not going to kick out Iran just because of this conflict. It's going to survive as a group and they want to keep that cohesion intact. One thing that's really interesting worries that this year they were supposed to have an evaluation for the baseline. Right? It's an important year. We need this new baseline. This is the perfect time. I mean, if we get her moves open, everyone should just produce as much as they can and that would be the biggest test, right? Yeah. We'll have that we don't need an audit anymore. We could just prove how much each country is able to recover, to produce, and there might be tweaks to that because unfortunately, as you said, a lot of these countries had damaged to their energy infrastructure. It'll be unfair to have their baselines assessed while they still have damage. So I'm sure they're going to come up with a different mechanism around that. But for other countries, I'm sure they can't wait till the situation resolves and they can just pump as much as they can. That was actually, I will say, that was actually a recommendation I had, I want to say last year, that that was exactly how OPEC should be established the baselines. They just say, beginning of 26, everyone goes free for all for six months, your average over that period. They haven't decided that just to clarify. No, no, no, no, no. You still have the quotas and that's why they keep having those meetings for us to have a guide on where they are. And so going off the latest official OPEC secondary source data. So the quota participating OPEC members is OPEC plus members. So all their production fall by roughly 7.6 million barrels a day, month on month and March, was that that was the second largest average monthly production climb in OPEC plus's history behind only the, the April 2020 kind of COVID cut. I guess it was May 2020. And overall production in the core OPEC group fell to the lowest levels since the 1990s. So like we are seeing like the baseline, the core of global oil supply kind of hit very, very deeply. And that 7.7 million or 7.6 million barrels a day cuts is monthly averages. So we are going to see that continue to fall into April as that kind of exit exit rate gets pulled through the average, which at this stage seems pretty reasonably likely that we're going to see the full shut-ins reflected in April production data given that we're only a week from the end of it at this stage. So what in terms of, you know, coming out of this, because I think there are, OPEC has had a lot of different layer challenges between non-opid production, between these baselines, now this war. What is the priority structure do you think coming out of this? You had mentioned kind of, you know, the potential for changing the baseline assessment process. I agree. They've always since so much time kind of going through the audit, you know, process and approving it twice, I should note, that it's always hard to kind of change that inertia. But obviously, I think on the other side of this, there likely will be an interpretation or a view that countries should pump as much as they can in the other side of this in order to kind of fill in that fundamental whole left in the market. What do you think? I mean, OPEC will always say it's kind of price blind, but I would say that it is obviously price informed. Do you think that they would do that or do you think they would need to see higher prices in our actualy produce more? It really depends where we are. I mean, it depends when this ends. I mean, for example, by the end of April, just by our calculations at Kepler, we would have lost around 700 million barrels from the Middle East. So if that gap keeps getting bigger and bigger and bigger, there will be a need for them to increase their production and maybe go to full capacity. And that again is contingent on how many of these countries is able to do that, how many would recover that, and how long and so on. And I think special provisions are going to be made for countries that need to repair some of those damaged facilities. It's really hard to say, but what I'm seeing right now, Rory, is that they still want to keep that framework intact. They want to keep that predictability. They want the market to know exactly what they're doing. So managing volatility, it's not just about the prices. They want to make sure that the price remains, they hate volatility and they hate dealing with volatility, either on the upside because that's going to destroy demand. And that's a really, really, really big concern out of all of this. I mean, don't think that $150 is an exciting number. No, they're concerned that it's going to start destroying demand and that they would need to curtail after that. So it depends when this conflict ends and the ceasefire that's been extended for, I don't know how long, do you know how long? I mean, it changes daily, whether or not it's indefinite or there is a definite end or maybe it's maybe it's sun, I think the last I saw was sun. No, it's so warm limbo here. So it's really hard to plan. And I think they're same thing with OPEC. How do you manage this market? It has to be kind of on a daily basis, right? No, totally. Well, Amanda, thank you so much for joining us. Before I let you go, I want to ask you two things. So first, if you were to watch any one indicator in this market, what are you watching for that inflection point? When is it so many people have called the end of this crisis is behind us already, right? Now, back when we were let's say at high 80s Brent or wherever earlier this month, beyond price, what indicator would you be watching for to really tell us that something fundamentally has changed? Is it as simple as just transit to the straight? Does it matter what type of trends that's where they're going? Talk to me like what the next major thing, like if you had one thing to watch on your board, what's that one thing? I'm not going to tell you that big headlines don't matter because apparently they do matter to the market and that's what everybody kind of trades off of. So if there is some kind of peace agreement, sure, it'll make the headline. But again, I'm somebody that likes to go back to reality. How does that translate into reality? What does that mean fundamentally? And watching what happens in the straight is something that I think is crucial. Seeing those first, I mean, seeing pre-war levels, seeing that 150, 170 vessels pass through, that means something changed and we're kind of back to normality. So I think the straight is kind of crucial here to the movement of and the end of the war and we need to beyond the headlines, we need that to translate into reality. And we haven't seen that yet, worry. I keep seeing that we're close. This is done. The war is over, but in reality, nothing changed. Yeah, I agree. I would say I'm looking forward to my like 24 hour nap when we finally get like more than 50 ships across the street in a single day even. I would take 50. Give me mid double digits and I would even go, okay, finally. But I agree. It's not there yet. So anyways, thank you so much for joining us, Amanda. Before we let you go, let our audience know where they can find you and your work and anything that they should be watching out for from you going forward. Sure. And I work with Kepler. So we have the subscriptions to the Kepler terminal. I write for the Insights section at Kepler and I also contribute to semifor kind of a monthly column. And I'm on Twitter just like you, Rory. And we exchange thoughts on Twitter all the time. Yeah, that's where you'd find me. Extra points for still calling at Twitter. Amanda, thank you so much for joining us today. Have a great day and get some sleep. The information presented should not be considered investment advice. The ClearComer Network and its affiliates are not responsible for any loss arising from any investment decision in connection with material presented herein. Please do your own research and speak with a licensed financial representative before making any investment decisions.