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Welcome to Big Digital Energy with Chuck Yates, Mark Meyer and Kirk Coburn. Weekly news in energy covering oil and gas and cleantech.
00;00;00;03 - 00;00;25;29
Unknown
Hey Clyde, welcome to the Monitoring the Situation episode of BD. Happy to have, special guest Dave Purcell back for another rousing macro conversation. We keep, keep going after, you know, despots and dictators, you know, on the cadence of once a month, we're going to have we're going to have to make you, a regular co-host. But, happy like that.
00;00;26;03 - 00;00;57;18
Unknown
We got Kirk today, too. So, wanted to start off with, you know, the, I think there's a lot of anticipation over the weekend, at least in the energy financial world of FTX and talking about expected response. And, you know, as I look at it now, crudes still hanging in there above 70. But reaction, initial reaction, pretty akin to what we saw last summer with, Operation Midnight Hammer.
00;00;57;20 - 00;01;30;21
Unknown
So, this certainly appears to be, of course, with our much more frontline direct involvement. Appears to be, at least initially, maybe shaking off some of what some of the pundits over the weekend would otherwise. But let's start let's start with kind of a macro and Iran oil and gas level set. Yeah. So I think the question you always want to ask is there's there's always risk premium.
00;01;30;21 - 00;01;56;09
Unknown
There's short covering. There's the things to get price going up. But is there a supply disruption. Is there the potential for to split the supply disruption. And is that going up. The difference between today and Operation Midnight Hammer is there's a lot of stuff going on in the Persian Gulf in and around it. Right. Midnight hammer was very targeted, very select.
00;01;56;12 - 00;02;21;19
Unknown
Hit a couple things in your gone. This is much different with the US hitting multiple sites in Iran and Iran firing back at US sites allegedly in neighboring countries. So all this is going on around the Persian Gulf. You get a lot of reports that are hard to verify. Did Iran sink or shoot at an oil tanker?
00;02;21;19 - 00;02;50;26
Unknown
Is. But we know there's fighting going on in the Persian Gulf and around the Persian Gulf. And that's where you should be concerned around supply disruptions. And you've you've seen it. Maersk and others have said, we're not shipping in the region, so we're just going to take the long way around. Whether that's oil or oil products or, you know, tennis shoes, they're staying out of the region.
00;02;50;26 - 00;03;23;07
Unknown
So those are the things that the LNG is allegedly being impacted as well. So I think you just want to look this week and say, what's that intensity around the shipping lanes? And does Iran get emboldened and try to kind of as a last ditch, do they try to hit Saudi oil infrastructure? Those are the those are the two things that make me kind of lose sleep on this.
00;03;23;10 - 00;03;46;01
Unknown
Yeah. I think, one of the things that I've been watching is, you know, I saw a little bit of the, secretary war and, chairman of the Joint Chiefs were talking about, you know, the media is interested in what the predicate is there. You know, hearing Democrats say, well, we kind of did an end around on, on, authorization.
00;03;46;01 - 00;04;25;22
Unknown
Well, you know, under the War Powers Act, the president has pretty broad discretion. But looking at what the the stated or the implied predicate is, is that we had Midnight Hammer and we've been using terms like obliterated their nuclear capability. But what I saw a little bit ago was, well, they've created this kind of conventional, very heavy on ballistic missile capability and drones, etc., and have not allowed, the inspectors and auditors to come back in.
00;04;25;22 - 00;05;03;01
Unknown
There's, there's been a standoff on, on weaponization, etc.. And so we've seen, you know, we've seen, I guess a wider field of fire in these first retaliatory, strikes from Iran all the way to Bahrain, cutters pulled its, its LNG, shut it down. And you mentioned the strait, traffic kind of workaround. Russ Turner, I think got hit, in a minor way, with some debris from an intercepted, attempted drone strike.
00;05;03;03 - 00;05;35;02
Unknown
And so these, these things appear to be fairly limited and easy to, relatively easy, or at least the way the markets, absorbing it and pricing and risk here, which has been a fairly mild reaction just given when you start to think about the scope of of things. But the notion that, you know, we're, we're reserving the right for this to be weeks, not days, is there is there something we don't see?
00;05;35;04 - 00;06;03;07
Unknown
You know what, I guess what could what could happen? Well, the weeks, the weeks, not days, is probably part of the reason why I like cruise up. I think you're you're a again you're given opportunity for regime change from within. If if you just say we're we're going to do this for 4 or 5 days, you know, they can do the, the Muhammad Ali rope a dope, right?
00;06;03;07 - 00;06;33;28
Unknown
They can go hunker down for 4 or 5 days and maybe make it through the other side. Where is this thing's going to be just an absolute pounding for weeks? You know what's left at the end of that. And so I think it gives you it gives the regime pause, but it also gives folks in country time to kind of start the shift, to continue the groundswell and see if there can be regime change.
00;06;34;00 - 00;06;55;14
Unknown
I think ultimately that would be the I mean, that's the read I think you did Midnight Hammer to, to hit, nuclear capability. And I think you did this for regime change. And, you know, I can I, I can be proven wrong on that. But I think it's that that's why you do this one and that's why you you hit the target, you hit.
00;06;55;17 - 00;07;26;08
Unknown
And hopefully there's something with organization that can fill that void. I mean, if you're if you're a government major or, an oil trader, besides those two people, who cares about those is my question. I don't mean that facetiously. I'm asking like, does anyone really care? Does this really impact global markets on any level? I mean, it's kind of reminds me a little bit of Ukraine, where it's just a war.
00;07;26;10 - 00;07;43;27
Unknown
I mean, there's people putting flags up because they care, but other than that, it doesn't impact me on a day to day basis. Who does this impact and why? It it's a it's a great question. I think Ukraine the if you say okay what's the impact outside of Ukraine. It was clearly steel prices. So there was a steel component.
00;07;44;00 - 00;08;05;14
Unknown
If you were in Europe, natural gas, if you owned a horse there, they Ukraine made the only components for most portions. So like yeah, that was an issue. Yeah. So those the one, the 0.1 percent of the population was, was really hurt. But but I think it was still here. It's a little bit broader because it is oil.
00;08;05;17 - 00;08;27;06
Unknown
And I think it's, you know, more shipping, just it's inflationary. I do think there's a again, this is way wavy. This is way beyond my scope. But is this, you know, this hurts the Chinese. I mean, you go in China, spends a lot of money in Venezuela, and that looks like a pretty bad investment right now.
00;08;27;06 - 00;08;52;26
Unknown
They've spent a lot of time kind of back in the Iranian regime, and that feels like a pretty bad investment right now. So, you know, is there a more subtle, hey, let's let's hurt China, in the pocketbook, as a, as a potential Taiwan deterrent. And, you know, again, there's a, you know, that that's saying two plus two equals 22.
00;08;52;26 - 00;09;11;25
Unknown
But there's, you know, I think there is something there. Yeah. So they one of our friends and former colleagues sent something I was glad to see this wrap it in CEO was out talking about,
00;09;11;27 - 00;10;02;10
Unknown
You know what? What the Iranians have the capacity to do or what they don't have the capacity to do, and they they clearly, and in a conventional sense, don't have at least the viewpoint from wrap it in who speaks Farsi, by the way, and was ex-CIA. They don't have the military capacity to fight and win. And so the belief is their strategy may be to continue to try and hit oil infrastructure, which if you believe, you know, some of those things targeted at Gulf states, is about then you get more of a intermediate term kind of shift upward in prices, which ultimately hurts the US.
00;10;02;10 - 00;10;26;09
Unknown
And then that's long enough, particularly in the middle of a pretty crucial, political season defined as the 2026 midterms. The US come to the table. Well, will you you remind that reminds me of a famous movie quote. Some people just want to watch the world burn or something to that effect. We saw that in Iraq. Is they retreating?
00;10;26;09 - 00;10;52;19
Unknown
They set their wells on fire. So, Wolf, why would why would they do that? Well, it's it's the it's the last ditch effort. And so that's where again, to me, the two things are, you look at Gulf Shipping and you look at, Saudi infrastructure, you know, that one square mile of processing facility that takes Gore and Mike, production is a pretty important target.
00;10;52;21 - 00;11;14;14
Unknown
Again, it goes back to the Iran-Iraq War where they were shooting, but I think both sides were shooting at oil tankers in the Persian Gulf. And if you remember, the US put, naval officers on the bridge of those tankers. So they were basically American flag tankers coming in and out of the Persian Gulf to protect them.
00;11;14;17 - 00;11;35;06
Unknown
So there there is precedent to this, and I'm not predicting it happens, but I think those are the the again, those are the signs I'm watching over the next couple of weeks to see if one if they start doing that, it clearly says they're desperate. But that's where the risk of a real supply side risk goes up.
00;11;35;09 - 00;12;07;10
Unknown
I mean, they've there's over 200 million barrels of Iranian oil floating on tankers right now. So what happens? What is happening? I mean, it seems like there was I mean, they've been trying to push as much oil on on the tankers as possible. At the same time, I think much of Iranian power, like Tehran is powered by their own oil, but they need to keep gas flowing in order to do that.
00;12;07;12 - 00;12;28;06
Unknown
What's happening? I mean, what is what is I mean, it's interesting to watch. At the same time, you got China that has what I think. I look this up, I was trying to figure out, but they have 111 million barrels of strategic reserves, sitting there as well. So, I'm trying to figure out if someone saw this coming.
00;12;28;08 - 00;12;58;16
Unknown
And, and what is happening, is it really weeks or does anyone really care? There's a lot of questions in that I know. Yeah. So so one the the oil on the water's important. I think the Chinese strategic reserve, they're probably some of the best oil traders in the world historically. Whether they were stocking up for potential to want Taiwan invasion or they saw this coming, they're, they're they're usually looking far over the horizon.
00;12;58;17 - 00;13;25;22
Unknown
So I think I think yeah, hard to know. But clearly they were they're preparing for something. You know the US has what are we at 400 just for for perspective, we're 400 and some odd million in our strategic reserves. So there's there's plenty of oil available if there's a disruption. But you, you're, you start to eat into that insurance policy.
00;13;25;24 - 00;13;55;03
Unknown
Right. And that's the that's the question. How long does insurance policy last and what insurance policies, diminish? You know, then you're really then you've got no buffer. So I don't think oil goes I'm not saying oil is going to go to 100, 120, but a supply disruption would certainly kick in. The circuit breakers on, you know, the IEA would do the coordinated release again in Europe.
00;13;55;03 - 00;14;26;05
Unknown
Those are refined products in the US. That's crude. So you'd have this, this IEA led, release of strategic stocks. China would certainly start to dip into theirs and buy as much of the Iranian crude as possible. So, I mean, those are first steps. But again, that's a that's a short lived thing. And we, we we should have 727 million barrels in our strategic reserves if our politicians didn't use it as a, as a piggy bank.
00;14;26;07 - 00;14;54;15
Unknown
But, you know, you that that's a whole different, political conversation. So, we have plenty, but we should have more. How much do you think of, you know, it's hard to tell, about the next crunch, of OPEC cut restoration. You know, that was a, I think, 137,000 barrels a day number. That was somewhat floating around over the weekend.
00;14;54;15 - 00;15;19;00
Unknown
And then I think yesterday I saw something where there was, some talk of them maybe increasing that to 206,000 barrels a day. What what should we be thinking about with respect to OPEC here and what they do or don't do? Yeah, I think you'll see them increase production. And I would assume they lean into the high end of whatever they were thinking.
00;15;19;02 - 00;15;43;07
Unknown
I think the real question is who's actually got excess capacity to put on the water? I think you've got Saudi and a few others. But so if they say 250,000 barrels a day, how much actually hits the, you know, hits the water, that's a that's a important, important conversation. And, you know, we won't know until you start to, to look at the tanker traffic.
00;15;43;10 - 00;16;21;21
Unknown
So, you know, there's, there's just a lot of, there's always uncertainty around OPEC production. It makes it a lot more opaque today. But I think they're going to try to make sure that the the world is amply supplied. I mean my the way I think about Saudi Arabia, it's it is important for them to be able, in times like this, to put more oil on the market, to keep prices from spiking, because if they can't show that they have significant excess capacity, there's they're just another big oil producer.
00;16;21;23 - 00;16;55;15
Unknown
There's no strategic advantage, right? There's strategic advantages. They can walk in and say, we got this. Here's another half a million barrels a day. Oil markets. We're good. Right. That's why they have friends in the world. And you know, it goes back to the to the, again. There was a, petroleum data quality conference in Madrid, Spain, when Secretary Richardson was was head of the D.o.e..
00;16;55;18 - 00;17;15;16
Unknown
I think I've used this analogy before, but it's important we were all talking about, hey, we need better data out of Saudi and out of OPEC. We need production, we need reserves, we need all this. And this guy stood up and he had this nice Armani Suen. His business card was adviser to oil minister on Miami, which is like a pretty cool business card to have.
00;17;15;18 - 00;17;34;02
Unknown
And if he had, he basically said very politely, you guys are wasting oxygen. We're not. The kingdom of Saudi Arabia is not going to give you that that information where I can tell you what our spare capacity is. And he said, wait a minute, the Kingdom of Saudi Arabia will provide you with all of that information, including spare capacity.
00;17;34;04 - 00;17;57;02
Unknown
If the US government provides us with the location of your missile silos in Kansas, of course we said yes. Right. Well, because everybody well, everybody in the room laughed. And I was thinking that actually is one of the most profound things I've heard in a long time, because that excess capacity is their strategic advantage. They're not going to tell you how much they have.
00;17;57;05 - 00;18;22;05
Unknown
They're going to they're going to tell you, but they're not going to show you. And so as long as as long as it's believed, they've got to to quote spike dikes, they're the big stinking lizard in the oil markets. If they can deliver on this excess capacity then yeah, they've got a massive geopolitical. They're they're of significant geopolitical importance.
00;18;22;07 - 00;18;48;14
Unknown
And and so the I think Saudi will do what they can to make sure the markets well supplied. David, here's my question because I'm trying to unpack this for us that that OPEC announced this increase on the same Sunday that the Strait of Hormuz became a live fire zone. And the Strait of Hormuz controls how much of the world's oil and its I mean, it's a it's a parking lot.
00;18;48;21 - 00;19;07;12
Unknown
Yeah. No it's it's a lot. And so I think what they're, what they're banking on is that the US Navy is going to keep that open. Right. We'll do our part will produce oil. We'll put it on ships. Somebody else has to make sure the, the that the straits open and look for. Full disclosure, I mean, I'm a victim of public school education, right?
00;19;07;12 - 00;19;28;11
Unknown
I didn't know were the same here where the Gulf was. So. So I always pull my maps out and look and it's just it is it is continue. It continues to be important to show how close everything is and how narrow that strait the Straits of Hormuz are and are is and and there it is a choke point.
00;19;28;15 - 00;19;56;29
Unknown
And so just looking at all the flows and, you know, there's, there's a lot of important oil production and infrastructure in a very, very small radius there. How many oil traders are texting Pete Hegseth right now trying to figure out what his next move is? Well, if I were if I, if I were to be, well, I won't they're probably texting Don Jr.
00;19;56;29 - 00;20;18;14
Unknown
But that's a another. Of course. Yeah. No, no, it's not direct. It's not at all. Yeah. You know that's going on. But you know, I'm not sure that would be all that helpful actually to know at this point. The Cruz now it's a now it's just a function of what it's really what are the Iranians do not what the US does.
00;20;18;16 - 00;20;37;27
Unknown
Well, who are the Iranians at this point? Well, that's, that's the question. I don't know that. I mean, that's where you hope you get regime change is something the military steps in and says, okay, enough because it's got to be somewhere in the military. But if you if you've thought through this and I'll let we'll go to you, Mark, in a second.
00;20;38;00 - 00;21;03;25
Unknown
I've thought through this for my for ever since I got to college is great regime change. CIA comes and they have this like playbook. They dust off this big manual about how to create a government. But the fact is, is that's really difficult. I mean, it's so hard when you think of just the US transition teams, the thousands of people that go into switching from one government to a next.
00;21;03;25 - 00;21;27;04
Unknown
And it's all coordinated. What happens when there is no truly coordinated and it this regime change happened. What do you do I mean that's months a years I mean right now, if you think about just from an energy perspective, how generation in Iran is 80 to 90% gas fired, they have to produce condensate to keep the lights on.
00;21;27;04 - 00;21;56;15
Unknown
Who's doing that? Forget the whole government. Like who's going to give you like a passport? Because I want to fly to Canada for my cousin's wedding. I mean, what's going on? Well, there's there's a lot there. And I know Mark's got a lot to to say on this, too, but I think the again, way over my skis, the challenge with regime change in a, in a historically Muslim country is where, where's the infrastructure?
00;21;56;15 - 00;22;21;18
Unknown
Where's the social infrastructure, where's the the power infrastructure? It's all religious, right? And so you you who's who are the who are the important people? Who do people look up to? Well, it's going to be a religious leader most likely. Well so do you trade trade one one for another. And have you actually improved the lot? Maybe not.
00;22;21;21 - 00;22;59;08
Unknown
You know, it. It's I think that's the risk of of regime change. It's like you said, it's, it's easy on paper. It's much more difficult in practice. So, Mark, what do you think? I think when you think of the context of, of Iran in particular, you look at the last 47 years since the revolution, there is a, a theocratic dictatorship, which at the very top is led by the supreme leader who is now dead.
00;22;59;08 - 00;23;29;18
Unknown
And I think there's some rumors floating around that they got the interim who was appointed shortly after. And, you know, we we've seen this kind of knock off succession. I don't know who's providing the Intel, but it's it's pretty amazing to see. But, like in Venezuela, what we did was, I think in the extreme hope for some type of opposition regime change.
00;23;29;18 - 00;24;14;27
Unknown
Well, we didn't get that. And what you saw was an ability or a willingness on the part of the administration to work with really, who was next in line behind Maduro. Well, you have a tremendous amount of negotiating leverage at that point because you went in and got Maduro, you know, is the same thing going to happen here because, you know, you look at recent events in Iran, the protests are heavily and not only in Iran but worldwide protest are we want to completely undo what the last 47 years have been about meaning, and I think in some scenario would be a return to, the days of the Shah.
00;24;15;00 - 00;24;58;01
Unknown
Right. One of the most progressive, eastern countries in the world, in Iran. And whether that kind of big step change is something that is practically doable given our approach here. You know, the president has already, conveyed a willingness to, to at some point speak with the new leadership. The question is the new leadership kind of that how many light or IRGC light or knowing that, you know, a lot of their leverage is now been obliterated, that we're going to get some kind of consideration back.
00;24;58;01 - 00;25;32;07
Unknown
And if you look at what what the primary discussion was after Venezuela, you know, the summit at the white House about going in and helping the Venezuelans rebuild their, you know, their their oil infrastructure and the capacity. Most of what Iran exports is subject to sanction, you know, are we willing to work with something that is a relic of the old regime and administration, or are we going to wait for, you know, kind of chaos to fill the vacuum?
00;25;32;07 - 00;26;03;00
Unknown
Because I don't know what the the true opposition, capacity for taking control of the country is. And one thing, just as a qualifier, one thing that Dan Pickering, used his qualifier this morning said, look, I'm just a, a geopolitical tourist here and that hold my hand up. I'm, I'm a geopolitical tourist. But is that getting to the you know, Iran is number three in the world in terms of reserves.
00;26;03;02 - 00;26;07;09
Unknown
They're one of the largest producers in the world.
00;26;07;11 - 00;26;50;05
Unknown
Most of what their export, capacity does today is through shadow and workarounds. Get to China. Right. So is there you know, is there is there a parallel play for us to, you know, create more access to what Iran can do from, its oil industry side and work something out with whatever the next regime looks like, whether it's a facsimile of what, what just got destroyed at the top layer or something completely, completely different.
00;26;50;08 - 00;27;13;03
Unknown
Yeah. So I think if if you think about this president, he is not a friend of the oil and gas business. He's a friend of low oil and gas prices. So what what will is he going to wait around for a democracy to break out? No, I think he's going to wait for a new regime that's not going to make nuclear build nuclear weapons.
00;27;13;06 - 00;27;33;04
Unknown
And if he can get that, that's a win for him. It's probably a win for the world. And then he'll negotiate and release and take sanctions off. And it's negative for oil price. Right. Oil prices are going to go up. And then you'll see you'll have a path for investment into the country. Again it's like Venezuela. It's going to take a while.
00;27;33;06 - 00;27;54;13
Unknown
But you have a path for more money to go in the country and help. The infrastructure. And it's it's money and investment. It's not Chinese. So I think that all makes sense. I think back to to Kirk's point with, with how do you keep the lights on in country? You know, it depends on what the regime looks like.
00;27;54;13 - 00;28;18;17
Unknown
If you look at Egypt, back when the Muslim Brotherhood took over, there wasn't a missed, there was no impact to production of oil and natural gas because the one the the infrastructure is out in the Western Desert. So it was away from potential. It was farther away from harm's way. But even the Muslim Brotherhood knew where their bread was buttered, and that they needed that oil and gas production.
00;28;18;19 - 00;28;39;13
Unknown
They needed that revenue to keep the country going. And I think in a, in a rational world, the the new regime is going to do what they can to let the oil guys do their, you know, keep, keep stuff flowing unless you get that I just want to watch the world burn mentality, you know, then then all bets are off.
00;28;39;13 - 00;29;19;27
Unknown
So again, there's a there's a lot there. I think it made sense, but it's I, I am a tourist as well, ma'am. I mean, this is like not to bring up the past, but I'm going to. I mean, everyone wants the mullahs gone. Nobody agrees on what comes next. The Sunnis want a seat at the table. I mean, imagine that, you know, I mean, I, you can imagine in the when the bourbon comes out, after all the cameras are off and Medina, that, you know, that the Saudis are like, man, we would love we need a seat at the table in Iran.
00;29;19;27 - 00;29;57;02
Unknown
You know, that conversation happens all the time, as you know, as the hashish is burning. I mean, Pahlavi wants his dad's table back and the IRGC wants to make sure, you know, no one flips the table over. I mean, this is this is probably the most dangerous succession crisis. Maybe we'll definitely this year for sure. Oh, no, I was going to say in her lifetime, but I don't think we realize, like, how it's like you'd rather it's the devil, you know.
00;29;57;04 - 00;30;24;10
Unknown
And I know we have the whole nuclear idea happening, but this is a powder keg. It'll be interesting to see what really happens because there's so much I mean, Iran, whether we like to say it or not, as you said, Dave, about, you know, maybe it's better for the world, but Iran has always sort of been the other Muslim country that has sort of kept the rest of the Sunni world at bay.
00;30;24;10 - 00;31;12;10
Unknown
And to some degree, yeah. But now you have that totally in play. And there's there's you know what? Sunnis are only like 5% of the country, but the rest of the Muslim world are are, feel very differently. So if you don't install a religious leader now, which is people are pushing for this sort of, you know, religious free democratic government, that's a, that's a, that's a that's a foothold into creating an Iran that maybe goes along with the rest of the Sunni world, which wants, very their view of the world is very different than the United States, I'll tell you that.
00;31;12;13 - 00;31;42;10
Unknown
I'm just wondering what what and we're talking about from an energy perspective. But if you really think what's in play here, energy is just kind of what brings everyone to the table. Yeah, that's the impact. That's that's why the rest of the world cares. And so yeah, I don't I don't know how to answer that again. Well, I'm a, I'm a victim of public school education and back during the Iraq War, there was a good book called The Shia Revival.
00;31;42;13 - 00;32;04;26
Unknown
It was put out by a guy who who taught at the Naval War College. And it's a really good history. And it it for me, it was a good, good kind of right down the middle backdrop of kind of how how you think about that conflict. It's kind of like Catholic, Protestant Northern Ireland, but on a much larger scale.
00;32;05;00 - 00;32;25;29
Unknown
If you get to Chris, I was up in northern Scotland this last summer and man, not not war is still on fire. And when they ask me questions about which football and I'm not talking about American football team, I followed, I knew that the answer would either create goodwill or they'd be throwing me out of their tax day.
00;32;25;29 - 00;33;07;07
Unknown
So, yeah. Good, good. Good point Dave. So the hatred is still burning on every part of the world when you when it comes to an enemy, that's for sure. Well, well, we saw what an attempted, Shia incursion in a majority Sunni country in, Pakistan yesterday in Karachi. They attempt or they got in the first perimeter of security around the consulate, which is a building, by way, and by the way from which I watched the Super Bowl one year, and it was one of the one of the Super Bowls in which the Cowboys defeated the Buffalo Bills.
00;33;07;10 - 00;33;37;16
Unknown
So that gives you an idea how long, how long ago it was. But, yeah, those are those are real interesting kind of cultural and balance of power shift. Throughout really the world of, of Islam and Islamic Republic's that. But I, you know, back to the, I guess, the parallels with Venezuela regime change or partial pseudo regime change.
00;33;37;16 - 00;34;14;25
Unknown
If you can think about Venezuela that way, you know, ultimately, I, I think we'd be naive to think. But because we've said for the longest time that, you know, Trump is not, per se, an oil and gas industry ally, certainly not the US oil and gas industry. Trump is a low, low oil price guy. And so the notion that you've got, you know, one of the world's largest producers, third largest proved reserves in the world, OECD inventories are now back above the five year average, first time since 2021.
00;34;14;27 - 00;34;49;05
Unknown
You've got em this time around. And we'll put up the Phil Verleger analysis or table of all these precipitating events over many, many years and what the 30, 60, 90 day reaction was to crude prices. Most of those were he had sustained price action. Either way, you didn't have you know, you didn't eat it. You didn't have the, supply diversification certainly didn't have another kind of fresh new 10 million barrels a day out of the US that you've got now that you didn't have 15 years ago.
00;34;49;08 - 00;35;16;06
Unknown
And so all these things I think are structurally bearish, today. And, and the reason that you see, somewhat of a, of a contained reaction when the perception is this, this could expand in scope, pretty quickly. And it was it's a lot bigger in implied scope, in, in force concentration than we saw back in and hammer.
00;35;16;09 - 00;35;36;27
Unknown
Yeah. 15 years ago. If this had happened, prices would have been up more than 4 or $5 a barrel. No question. In my in my opinion, I think the market gets numb to risk premium. And it's just show me market. I think you have to you have to have a meaningful supply disruption to continue to see crude move higher.
00;35;37;05 - 00;36;05;23
Unknown
So what what one what again the Venezuela Iran parallel and talk. We talked a lot about the state of PDVSA and how it's declined over the last 25 years. And you're inheriting a big kind of rehabilitation program, not only from a capital and execution perspective, but also from your your state oil company partner in terms of capability.
00;36;05;25 - 00;36;34;02
Unknown
Any any perspective on comparing contrasting the Iranian national company with, something like PDVSA? It seems just outside looking in, they've done a pretty good job of maintaining the asset that is, you know, Iran's oil and gas infrastructure. Yeah. It feels like it. It's hard to get visibility. But I think the, you know, the they are better today than PDVSA is.
00;36;34;04 - 00;36;58;10
Unknown
They've probably gone by a lot more. I would think so by a lot. Now they've got better assets. You're not you're not dealing with really mature. Sorry to my Venezuelan friends, but you're you're not dealing with mature, conventional oil in Lake Maracaibo and a bunch of really heavy oil in Orinoco. I mean, you got much better reservoir rock and and crude quality to work with.
00;36;58;12 - 00;37;18;17
Unknown
You've got one of the biggest gas fields in the world, if not the biggest gas field in the world. For your LNG and condensate. So they've got they got better assets and, you know, it's always hard to mess up a really good asset. But they also have Chinese, capability and, and capital behind them. So which isn't great, but it's it's it's okay.
00;37;18;17 - 00;37;50;14
Unknown
I mean, it seems to have been worked for a while. I would imagine real technology and capital could come in and really help out. But I've got I've got much better visibility on Venezuela than I do on Iran. So, so, so this is not investment advice, but what I think what we've seen in the past series of these types of events is that kind of fading.
00;37;50;17 - 00;38;10;21
Unknown
The trade has been the right call. I did see someone poking fun at Jim Cramer's call this morning to, sell half your oil stocks, Well, yeah. Wrong way. Jimmy is. I think some people call him. Yeah. Makes makes me pause on that one.
00;38;10;23 - 00;38;39;27
Unknown
Yeah, I yeah, I yeah, I don't know Kirk. What do you think. No, I, I if you look at this, and maybe it's just as we get older, I think this is a yawn. It's a hiccup in terms of if you look at what what's happening with oil prices. And we are truly living in a global market where there's a lot of who's the swing provider anymore.
00;38;39;27 - 00;39;05;29
Unknown
I mean, the Saudis haven't even touched their unconventional oils. They've got so much oil, they they to me, every time I talk to someone over at Aramco, the one message that keeps coming back, that's sort of like, we have so much we haven't even tried to get yet. Ha ha ha. But the world has a lot of oil that hasn't been touched.
00;39;06;01 - 00;39;37;01
Unknown
And so I think in some ways and you've got this big US domestic capability that was unleashed in some way. I know we can't export it. That's a whole different story. But this to me is a yawn moan that, oil and gas prices, but that should scare all of us, because what's not being talked about is the regime change and what really is going to happen, because the powder keg is the Middle East and always has been.
00;39;37;01 - 00;40;01;27
Unknown
Maybe that's because that's where Adam and Eve got kicked out of the garden, and that created the whole mess in the first place, if you believe that. But, I think that's the the story we're going to be talking about in a year from now. It's kind of like when, you know, when, Hayden went over and during the Olympics and captured that little territory that he thought it was his kind of people were like, man, what happened?
00;40;01;27 - 00;40;30;08
Unknown
Same with Ukraine. Like, this is one of those growing, sort of festering little itches, skin disease problem that if you don't take care of it quickly, it's going to kill you. I think that's going to be the story. And if Iran blows up and becomes a the geopolitical event that it could, that's going to be the more interesting analysis, because right now we're all like yawning and let's move on.
00;40;30;08 - 00;40;52;08
Unknown
And we're watching the women taking their hijabs off and celebrating in the streets and telling their, you know, the religious police to go, you know, go screw yourself because we're not going to listen to you anymore. That's all really cool to watch and really fun. But the question is, is who's behind the scenes and what are they trying to do, and why is that?
00;40;52;15 - 00;41;20;15
Unknown
What's the real objective that that to me is what we should be watching. And stay tuned, is all I'm going to say in that in that chaotic scenario, where there's a lot of uncertainty and, you know, we we've seen these types of things precipitate or raise global recession or pressures, which, you know, has a direct impact on global demand.
00;41;20;17 - 00;41;50;09
Unknown
And I guess we can finish it up here. Maybe touching on demand. Yeah. Well, again, I look at how much oil OPEC's put on the market allegedly in the last 12, 12 months or so and inventories are, she believes, the IEA, OECD, which I historically do. You're just above five year averages. You look at Cushing inventories, you're still kind of rocking along the bottom.
00;41;50;11 - 00;42;12;08
Unknown
I think that that tells you two things. Either OPEC's some of the OPEC members can't hit their objectives and that's a possibility or demand is really good. And if you look at the implied demand numbers in the US. So these are the the product supplied numbers. So it's an implied demand number. They're not great but they're okay.
00;42;12;10 - 00;42;34;26
Unknown
You know your 3.4% growth year to date year over year. Your 5.4% year over year over the last four weeks. Now you've got probably bad weather comps a year ago. I mean, there's a lot the noise there, but those are the 3.4% growth in the US for the first two months of the year versus a year ago. I don't care.
00;42;34;27 - 00;43;04;02
Unknown
That's gets revised down to 2.4%. That is salty growth, man. For a fifth of the world demand. So I think you've got you got both of those playing. You've got decent demand and you've got maybe a little bit less supply hitting the market than the models would tell you. And, you know, as long as oil prices still stay lower, there's a decent catalyst for, for for that demand to continue.
00;43;04;02 - 00;43;29;14
Unknown
The worst thing that could happen is a price spike. And then you start to to significantly moderate demand. I mean, Dave, I know you're a loyal listener, so you know that we've solved some of the demand spikes are temporary in the US because, we're we're going to all EV cars, you know, as you know, because no one's buying gas, ice, cars anymore.
00;43;29;17 - 00;44;04;08
Unknown
And we're putting data centers in space. So there goes I need for demand. So, where is that demand going? Yeah, yeah, yeah, I know, I don't know, somewhere. Yeah. Private jet was to get the rockets into space to get the ax. True. That's true. It's it's temporary jet fuel demand. Rocket fuel demand. You know, speaking of rockets, we were cynically commenting about the IEA and are we're going to hear something from them this week in terms of a report.
00;44;04;08 - 00;44;27;03
Unknown
But, I think I made the comment that they'll probably issue the report on missile emissions and climate change as a result of military action that's taking place over the weekend before, you know, we we get something thoughtful out of the IEA, at least in terms of the leadership, but that they've morphed into a, wildly disappointing organization.
00;44;27;03 - 00;44;47;07
Unknown
I think their data that the data folks are good, the ones who you generate the oil market report, looking at the current data, I think they do a great job. But the organization itself has just become a massive finger in the wind. What do people want us to think? And that's not why that organization was built. That's not why that organization was put together and funded.
00;44;47;07 - 00;45;20;24
Unknown
It was to help us understand critical issues in the oil and gas, global oil and gas business. And they've they've been they get a huge F for that over the last decade. It just just complete embarrassment. So IEA step up. This is your moment. And third notice I snuck that in because I snuck the IEA and which is which is a verboten topic when when Chuck's on I mean, I didn't realize is becoming an IEA watchdog podcast, but it must it might as well be.
00;45;20;27 - 00;45;46;03
Unknown
It's it's one of the many useful functions that Beatty plays. I can't believe I'm saying this, but I'm actually admiring, like the scenario teams both. Well, I don't know about BP's team at this point, but at shell, and when they do these big outlooks, they're fin. Those guys are fantastic. And when I was at shell, I got to meet some of the guys that wrote some of our scenario analysis.
00;45;46;05 - 00;46;12;17
Unknown
But I don't know why the IEA doesn't protect and allow the the true data analyst to do their jobs. It's it's unfortunate. Yeah. Couldn't said it better. Well Dave, what a pleasure having you. And thank you for bringing up that the public education, you know, I mean, I went to a proper university, the University of Texas. So at least we have that going for us.
00;46;12;22 - 00;46;42;20
Unknown
Well, I got to show A&M here, so I'm rep. Rep in the colors here. But yeah I think it's it's the I think world geography is important here, particularly in this little event we have going on. We'll take two questions before we leave you. One is, if you're in the Strait of Hormuz and you're a kid, are you, like, getting your little boat and becoming, a terrorist on on the Waters?
00;46;42;22 - 00;47;07;18
Unknown
And what could you charge to do that? Secondly, what percentage of oil and gas executives are Aggies? So one no, I'm not getting in my boat. And to the second answer is not nearly enough. I at one point I thought there were more Aggies running oil and gas than by far than any other university. That's got to still be true.
00;47;07;20 - 00;47;30;21
Unknown
I don't know, it may be, I hope so. Well, that's an answer for next time, then. All right. Well thank you guys. Thanks, Dave. Thanks, everybody. If, you like this show, share it with friends. And, we'll see you next. And, like, subscribe. And if you have an answer of what's happening in Iran, please tell us and make your prediction.
00;47;30;28 - 00;48;06;24
Unknown
I've got the Nate Bearcats, from the Washington streams. Get when he's asked to pronounce, Fahrenheit or explain something nobody knows. I just remember being in and, in school. Public school, of course, in Houston. And I this kid on Fridays always wore the same t shirt I ran from Iran in 1978.
00;48;06;26 - 00;48;07;09
Unknown
Shares.