Welcome to Kobe Time, a podcast series on Markets and Economies from D BS Group Research. I'm Turbe, chief economist, welcoming you to our 115th episode. Happy 2024. Today's guest is a returnee Vanda Da Hari is the founder of Banda Insights, a Singapore based provider of intelligence on the global energy markets. She was with us in the early days of Copy Time back in April 2020 on episode 10.

Welcome to Kobe Time, a podcast series on Markets and Economies from D BS Group Research. I'm Turbe, chief economist, welcoming you to our 115th episode. Happy 2024. Today's guest is a returnee Vanda Da Hari is the founder of Banda Insights, a Singapore based provider of intelligence on the global energy markets. She was with us in the early days of Copy Time back in April 2020 on episode 10.

Those were the days when wt I futures were in negative territory.

Those were the days when wt I futures were in negative territory.

Man, I came back to Kobe time in March 2022 on episode 72. When Russia's invasion of Ukraine was attending energy markets. Today, the energy markets also have no shortage of drama, London Hari. Welcome back to Kobe time. Thank

Man, I came back to Kobe time in March 2022 on episode 72. When Russia's invasion of Ukraine was attending energy markets. Today, the energy markets also have no shortage of drama, London Hari. Welcome back to Kobe time. Thank

you so much for having me back, Timor. It's absolutely my pleasure. And thank you also for that very quick recap um of our journey um over the past two or three years. It's, it's really interesting. We have yet another interesting episode. Now.

you so much for having me back, Timor. It's absolutely my pleasure. And thank you also for that very quick recap um of our journey um over the past two or three years. It's, it's really interesting. We have yet another interesting episode. Now.

Absolutely, you and I talked to have conversation both in terms of market exuberant as well as when the markets were in utter despair. Uh and all that, as you said, in the span of just three or four years. So pan, then we are reconnecting. It's mid January 2024 and the potential risk of energy supply have popped up again. So let's start with the very near tr

Absolutely, you and I talked to have conversation both in terms of market exuberant as well as when the markets were in utter despair. Uh and all that, as you said, in the span of just three or four years. So pan, then we are reconnecting. It's mid January 2024 and the potential risk of energy supply have popped up again. So let's start with the very near tr

walk us through various scenarios or the red Sea tensions that could affect the energy market.

walk us through various scenarios or the red Sea tensions that could affect the energy market.

Yeah, that's a good place to start, Timor. It's absolutely the focal point of attention. Well, not just for the oil markets but uh in, in terms of news headlines, right for the past several weeks. So um let's take a look at the Red Sea and that region from an oil market perspective. So if you look at the Red Sea, it is the shortest route for connecting Eastern US

Yeah, that's a good place to start, Timor. It's absolutely the focal point of attention. Well, not just for the oil markets but uh in, in terms of news headlines, right for the past several weeks. So um let's take a look at the Red Sea and that region from an oil market perspective. So if you look at the Red Sea, it is the shortest route for connecting Eastern US

and Europe on the one hand with the Middle East and Asia on the other. Now, the moment you take that into account, you know, I think the picture becomes pretty clear, not just oil and gas, but even in terms of goods trade that it's a vital shipping route. Now, as I mentioned, it's the shortest route. It's not the only option, but um obviously taking the shortest route

and Europe on the one hand with the Middle East and Asia on the other. Now, the moment you take that into account, you know, I think the picture becomes pretty clear, not just oil and gas, but even in terms of goods trade that it's a vital shipping route. Now, as I mentioned, it's the shortest route. It's not the only option, but um obviously taking the shortest route

for any cargo, any whether it's oil and gas or any, any goods um is obviously key, especially in, in the current climate of uh you know, high inflation, supply chains are easing but you know, still not as uh let's say normal as they were pre COVID. So when you, when you ask me about scenarios, I think that there lies a major challenge for the oil market. So what

for any cargo, any whether it's oil and gas or any, any goods um is obviously key, especially in, in the current climate of uh you know, high inflation, supply chains are easing but you know, still not as uh let's say normal as they were pre COVID. So when you, when you ask me about scenarios, I think that there lies a major challenge for the oil market. So what

we do know? So we know this is a vital artery. Um We know that the Red Sea saw about roughly a little over 8 million barrels per day of oil, both crude and refined products, transiting it in, in both directions. So from the the areas, as I mentioned, from the west to the east and from the east to the west, this was until the Houthis began their attacks on merchant ships,

we do know? So we know this is a vital artery. Um We know that the Red Sea saw about roughly a little over 8 million barrels per day of oil, both crude and refined products, transiting it in, in both directions. So from the the areas, as I mentioned, from the west to the east and from the east to the west, this was until the Houthis began their attacks on merchant ships,

the Red Sea around mid November. So since then, obviously a lot of um ships have started to get diverted. Now, there's been an interesting divergence in that more much bigger ratio of container ships. So, you know, those that carry containers and dry bulk and so on have been diverted, you know, close to 90% perhaps at this point.

the Red Sea around mid November. So since then, obviously a lot of um ships have started to get diverted. Now, there's been an interesting divergence in that more much bigger ratio of container ships. So, you know, those that carry containers and dry bulk and so on have been diverted, you know, close to 90% perhaps at this point.

But um for a long time after the attacks began oil and gas tankers continued to transit, um important to keep in mind that there were no incidents. So incidents of major damage, you know, certainly not any, any fire or certainly no no casualties. So I think that was perhaps a factor. Um now, so the market is

But um for a long time after the attacks began oil and gas tankers continued to transit, um important to keep in mind that there were no incidents. So incidents of major damage, you know, certainly not any, any fire or certainly no no casualties. So I think that was perhaps a factor. Um now, so the market is

what the market is contemplating right now. Yes. Uh maybe perhaps up to 10 to 20% of oil, um that would have passed through that artery is being diverted. Uh it's having to take a much longer route via the cape of good hope in in southern Africa. Um Now ballpark that adds maybe like 14 to, to uh 10 days to 14 days to to the journey.

what the market is contemplating right now. Yes. Uh maybe perhaps up to 10 to 20% of oil, um that would have passed through that artery is being diverted. Uh it's having to take a much longer route via the cape of good hope in in southern Africa. Um Now ballpark that adds maybe like 14 to, to uh 10 days to 14 days to to the journey.

Um And obviously that has had a ripple effect, right? And we can talk a little more about that, but, but that is what the oil market is, can see today. That is what has been factored into prices today.

Um And obviously that has had a ripple effect, right? And we can talk a little more about that, but, but that is what the oil market is, can see today. That is what has been factored into prices today.

The going back to the challenges if we talk about scenarios. Now, obviously anything does any disturbance and this is much more than that right happens in the Middle East. The oil market participants have to start pricing in to a certain degree at least um some of the worst case scenario.

The going back to the challenges if we talk about scenarios. Now, obviously anything does any disturbance and this is much more than that right happens in the Middle East. The oil market participants have to start pricing in to a certain degree at least um some of the worst case scenario.

And in this case, of course, it is that what if the Red Sea gets entirely shut uh to oil, oil and gas traffic then yes, everything could still come by a cape of good hope. Uh But you know, you're then talking of a much tighter market in terms of tanker availability, much higher freight rates and so on.

And in this case, of course, it is that what if the Red Sea gets entirely shut uh to oil, oil and gas traffic then yes, everything could still come by a cape of good hope. Uh But you know, you're then talking of a much tighter market in terms of tanker availability, much higher freight rates and so on.

Um Some of the w much worse scenarios, of course, are, you know, a wider a contagion effect if you will in the Middle East because of, you know, we're assuming that this Israel Hamas conflict is, is going to fester for some time. Unfortunately. So what so far we have seen great restraint from the Middle Eastern powers

Um Some of the w much worse scenarios, of course, are, you know, a wider a contagion effect if you will in the Middle East because of, you know, we're assuming that this Israel Hamas conflict is, is going to fester for some time. Unfortunately. So what so far we have seen great restraint from the Middle Eastern powers

uh, you know, what if the other countries in the region get dragged into it and you know, what if? So it's, it's a lot of like, what if questions, nothing that any of us in our lifetimes, um, or even read in history books having unfolded like a wider conflagration. But that's the worst case scenario. But certainly, you know, seeing where prices are today as we're talking,

uh, you know, what if the other countries in the region get dragged into it and you know, what if? So it's, it's a lot of like, what if questions, nothing that any of us in our lifetimes, um, or even read in history books having unfolded like a wider conflagration. But that's the worst case scenario. But certainly, you know, seeing where prices are today as we're talking,

um, you know, Brent around $78. Uh what I can tell you is that is probably anywhere from 2 to $3 of risk premium. Certainly nowhere near pricing in that worst case scenario of like, you know, a quarter of the oil supply of the world comes from that region. Um You know what if that is disrupted, that's almost, uh you know, hard for anybody to imagine,

um, you know, Brent around $78. Uh what I can tell you is that is probably anywhere from 2 to $3 of risk premium. Certainly nowhere near pricing in that worst case scenario of like, you know, a quarter of the oil supply of the world comes from that region. Um You know what if that is disrupted, that's almost, uh you know, hard for anybody to imagine,

right. And so

right. And so

super interesting to sort of think in terms of, you know, the worst case scenario and sort of build from that. Uh And to your point that it's not just about the scenario of oil, not going through the Red Sea, but if there is a wider conflict, there are lots of oil refineries and oil fields

super interesting to sort of think in terms of, you know, the worst case scenario and sort of build from that. Uh And to your point that it's not just about the scenario of oil, not going through the Red Sea, but if there is a wider conflict, there are lots of oil refineries and oil fields

in the region and missiles can ignore boundaries and defense systems and all you need is a couple of missiles in one refinery and there could be a wholesale panic uh in, in the oil market. And also, you know, the reality is that while no more than a quarter of the oil come from the region. The world has fragmented a bit. Russian oil does not go everywhere or maybe it gets refined and go somewhere and elsewhere. But, but things are far more fragmented than they were just a couple of years ago because of the Russia Ukraine conflict.

in the region and missiles can ignore boundaries and defense systems and all you need is a couple of missiles in one refinery and there could be a wholesale panic uh in, in the oil market. And also, you know, the reality is that while no more than a quarter of the oil come from the region. The world has fragmented a bit. Russian oil does not go everywhere or maybe it gets refined and go somewhere and elsewhere. But, but things are far more fragmented than they were just a couple of years ago because of the Russia Ukraine conflict.

Um I have to ask you one technical question. So the interaction between shipping costs and energy prices, um is there like a full and immediate fast because you know, we have seen uh

Um I have to ask you one technical question. So the interaction between shipping costs and energy prices, um is there like a full and immediate fast because you know, we have seen uh

uh you know, Shanghai freight trade or world freight composite and those sort of indicators they were at basically prepa lows with extremely low levels in December. And since then, they have doubled. But even that is not particularly high by the sort of spikes we saw during the pandemic, but even this doubling of freight rates, what does it mean for spot futures energy price action?

uh you know, Shanghai freight trade or world freight composite and those sort of indicators they were at basically prepa lows with extremely low levels in December. And since then, they have doubled. But even that is not particularly high by the sort of spikes we saw during the pandemic, but even this doubling of freight rates, what does it mean for spot futures energy price action?

Yeah. So higher freight rates uh does mean higher shipping costs. So if you're a refiner, then your input cost of of crude um is going up and either your margin will be squeezed um or you will try and pass through those costs um to your end user which means you see higher prices of fuel prices at the pump.

Yeah. So higher freight rates uh does mean higher shipping costs. So if you're a refiner, then your input cost of of crude um is going up and either your margin will be squeezed um or you will try and pass through those costs um to your end user which means you see higher prices of fuel prices at the pump.

Now, what's happening a couple of things? Uh The reason we are not seeing this immediate pass through of the high freight cost that you're probably reading

Now, what's happening a couple of things? Uh The reason we are not seeing this immediate pass through of the high freight cost that you're probably reading

uh every day in the news is that first of all, it's, there's going to be a bit of a lag effect. So it typically, if you're looking at a refiner, you know, they, they, they get the crude into the refinery, uh it's, it takes a few weeks to a couple of months until that uh crude is transformed into refined product and hits the market. Um or basically your, your fuel pump. Um

uh every day in the news is that first of all, it's, there's going to be a bit of a lag effect. So it typically, if you're looking at a refiner, you know, they, they, they get the crude into the refinery, uh it's, it takes a few weeks to a couple of months until that uh crude is transformed into refined product and hits the market. Um or basically your, your fuel pump. Um

there you in, in some parts, especially here if you are looking at Asia, uh it's not always easy for Refiners to pass through. Um all of the increased costs. So they may take some of the hit. Um And then the other is, is a lag effect. Uh So you probably not see that sort of crunch time until a few weeks down the line.

there you in, in some parts, especially here if you are looking at Asia, uh it's not always easy for Refiners to pass through. Um all of the increased costs. So they may take some of the hit. Um And then the other is, is a lag effect. Uh So you probably not see that sort of crunch time until a few weeks down the line.

Um You mentioned uh So when we talk about uh benchmark crude futures, now those, so let's say we talk about brand wt I or, or Dubai um all of those prices that let's say what you're seeing on the screen um or you are being talked about in the market are free on board prices. So they do not include uh shipping charges of freight costs or insurance costs for that matter.

Um You mentioned uh So when we talk about uh benchmark crude futures, now those, so let's say we talk about brand wt I or, or Dubai um all of those prices that let's say what you're seeing on the screen um or you are being talked about in the market are free on board prices. So they do not include uh shipping charges of freight costs or insurance costs for that matter.

So that's also a reason for a bit of a lack of transparency. So while you can see what Brent is doing, um you know, you can't always see what the landed cost of the of the refiner is doing.

So that's also a reason for a bit of a lack of transparency. So while you can see what Brent is doing, um you know, you can't always see what the landed cost of the of the refiner is doing.

I see. Um and uh I remember um years ago, I think this was long before you and I showed up in our podcast platform. Uh I think 10 years ago, there was this all this discussion of the oil market being in Contango and back and the relationship because of the spot on the futures. So how would you characterize the relationship between spot and futures right now in the oil market?

I see. Um and uh I remember um years ago, I think this was long before you and I showed up in our podcast platform. Uh I think 10 years ago, there was this all this discussion of the oil market being in Contango and back and the relationship because of the spot on the futures. So how would you characterize the relationship between spot and futures right now in the oil market?

Yeah. So the two have to be absolutely connected. Um And um the connection or comparison that is more often discussed is between the so called physical market where you know, buyers and sellers are actually bidding and offering a physical crude barrels and the futures market. So futures then

Yeah. So the two have to be absolutely connected. Um And um the connection or comparison that is more often discussed is between the so called physical market where you know, buyers and sellers are actually bidding and offering a physical crude barrels and the futures market. So futures then

most often than not, they are financially settled instruments and you can buy as little as just 1000 barrels of a contract wt I or, or, or Bren and so on. The two are definitely connected at the hip. They have to have to move uh in, in tandem. Um What we are seeing right now in the future is let's say the forward curve you mentioned Contango and backwardation.

most often than not, they are financially settled instruments and you can buy as little as just 1000 barrels of a contract wt I or, or, or Bren and so on. The two are definitely connected at the hip. They have to have to move uh in, in tandem. Um What we are seeing right now in the future is let's say the forward curve you mentioned Contango and backwardation.

Uh wt I the, the US benchmark crude is in a in a Contango which reflects the fact that there is plenty of supply, immediate supply in the prompt market. Brent is in a little bit of uh but very mild backwardation, which again tells you that there is plenty of supply in the market and that is exactly what is being reflected in the physical market as well.

Uh wt I the, the US benchmark crude is in a in a Contango which reflects the fact that there is plenty of supply, immediate supply in the prompt market. Brent is in a little bit of uh but very mild backwardation, which again tells you that there is plenty of supply in the market and that is exactly what is being reflected in the physical market as well.

So in the physical market, for instance, um you know, something that a lot of attention is paid to is these official selling prices from the Middle Eastern producers that are announced in a month on a monthly basis. And a major talking point a few days ago was when Saudi Aramco, it sort of sets the stage for, um you know, what, what's the, what's the mood in the market and, and especially amongst the

So in the physical market, for instance, um you know, something that a lot of attention is paid to is these official selling prices from the Middle Eastern producers that are announced in a month on a monthly basis. And a major talking point a few days ago was when Saudi Aramco, it sort of sets the stage for, um you know, what, what's the, what's the mood in the market and, and especially amongst the

Middle Eastern producers and exporters, it slashed in a big way. Uh the differential that it charges to customers in Asia and actually around the world for February loading cargo. So there's plenty of anecdotal evidence whether you're talking about the physical markets or the futures markets, uh that there is plenty full of supply and perhaps a view that demand is going to be sluggish this year.

Middle Eastern producers and exporters, it slashed in a big way. Uh the differential that it charges to customers in Asia and actually around the world for February loading cargo. So there's plenty of anecdotal evidence whether you're talking about the physical markets or the futures markets, uh that there is plenty full of supply and perhaps a view that demand is going to be sluggish this year.

That's right. So I want to talk a little more on the issue of supply and demand momentarily. But before that, let's stick with geopolitical a little longer. So we talked a bit about the Middle East, but then there's a whole Russia Ukraine conflict and its energy demand dimensions. So, you know, you and I last time talked about the Ukraine conflict when there was tremendous uncertainty about where would Europe get its gas? Where would you get its oil? Who can Russia sell to and can there be a cap? So

That's right. So I want to talk a little more on the issue of supply and demand momentarily. But before that, let's stick with geopolitical a little longer. So we talked a bit about the Middle East, but then there's a whole Russia Ukraine conflict and its energy demand dimensions. So, you know, you and I last time talked about the Ukraine conflict when there was tremendous uncertainty about where would Europe get its gas? Where would you get its oil? Who can Russia sell to and can there be a cap? So

let's sort of walk through the last two years uh with respect to Russian oil and Russian energy and gas and how, how that has sort of impacted the global landscape.

let's sort of walk through the last two years uh with respect to Russian oil and Russian energy and gas and how, how that has sort of impacted the global landscape.

Yeah, great question. Uh Timor and what a difference two years makes and actually it's been less than two years, right? Since Russia was cornered, it found itself in a corner as a result of sanctions as a result of embargoes whereby

Yeah, great question. Uh Timor and what a difference two years makes and actually it's been less than two years, right? Since Russia was cornered, it found itself in a corner as a result of sanctions as a result of embargoes whereby

uh Europe and the G7 countries uh said that we are going to phase out and with the purchases of Russian oil, with the view of completely ending it, which is exactly what they've done. So uh in November, uh sorry, December 2022 Europe completely halted all sea born imports of Russian crude.

uh Europe and the G7 countries uh said that we are going to phase out and with the purchases of Russian oil, with the view of completely ending it, which is exactly what they've done. So uh in November, uh sorry, December 2022 Europe completely halted all sea born imports of Russian crude.

Um for Europe was the biggest market for Russia. Russia was the biggest supplier for Europe. So here we're talking about a major, major shift in uh in, in trade routes and, and trade patterns, you know, the, the the likes of which we haven't seen. Um And then, and in February of last year, Europe completely halted all sea borne refined product imports from uh from Russia.

Um for Europe was the biggest market for Russia. Russia was the biggest supplier for Europe. So here we're talking about a major, major shift in uh in, in trade routes and, and trade patterns, you know, the, the the likes of which we haven't seen. Um And then, and in February of last year, Europe completely halted all sea borne refined product imports from uh from Russia.

And uh you know, when this whole thing started. So this is we're talking about the early months of 2022 after the Ukraine invasion. There was a great deal of fear that because let's face it, you know, nobody had seen a country of the size of a producer of the size of

And uh you know, when this whole thing started. So this is we're talking about the early months of 2022 after the Ukraine invasion. There was a great deal of fear that because let's face it, you know, nobody had seen a country of the size of a producer of the size of

Russia, an exporter of the size of Russia um being slapped with sanctions and embargoes. So we had, we, we had the experience of embargoes and sanctions rather us sanctions against Venezuela, Iran, you know, much smaller producers and exporters compared with Russia. So there was a lot of fear. Um and as it turned out that that fear was turned out to be completely unfounded and, and thank God for that because, you know,

Russia, an exporter of the size of Russia um being slapped with sanctions and embargoes. So we had, we, we had the experience of embargoes and sanctions rather us sanctions against Venezuela, Iran, you know, much smaller producers and exporters compared with Russia. So there was a lot of fear. Um and as it turned out that that fear was turned out to be completely unfounded and, and thank God for that because, you know,

some people were contemplating Armageddon in the oil markets. You know, if you're talking about like

some people were contemplating Armageddon in the oil markets. You know, if you're talking about like

indeed, and which is, which was understandable. And again, you know, this is like talking, this was the worst case scenario again, which is very hard to contemplate, very hard to price in as a result of which people were sort of like putting a number in the air that, you know, who knows, we could see 200. Well, thank God, as I said, none of that happened. And um this is testimony to the remarkable Brazil

indeed, and which is, which was understandable. And again, you know, this is like talking, this was the worst case scenario again, which is very hard to contemplate, very hard to price in as a result of which people were sort of like putting a number in the air that, you know, who knows, we could see 200. Well, thank God, as I said, none of that happened. And um this is testimony to the remarkable Brazil

of the global oil markets. Uh the the fil the the interconnectivity, the the resilience of supply chains in a way as well that all of that Russian crude and refined products which got locked out of Europe have been very smoothly, I would say relatively smoothly. Yes, it's, it's caused some

of the global oil markets. Uh the the fil the the interconnectivity, the the resilience of supply chains in a way as well that all of that Russian crude and refined products which got locked out of Europe have been very smoothly, I would say relatively smoothly. Yes, it's, it's caused some

uh tightness in the in the tanker market and so on, but relatively smoothly for such a big operation have been rewired. So um what we see is like close to 4 million barrels per day of Russian Seaborne crude exports. And I'm stressing on, on Seaborne because there's some pipeline crude that continues to flow from Russia into Europe and it certainly goes into China as well.

uh tightness in the in the tanker market and so on, but relatively smoothly for such a big operation have been rewired. So um what we see is like close to 4 million barrels per day of Russian Seaborne crude exports. And I'm stressing on, on Seaborne because there's some pipeline crude that continues to flow from Russia into Europe and it certainly goes into China as well.

Uh And, and Seaborne exports about 3, 3.5 million barrels per day of refined products exports have all found homes outside Europe. So China and India have stepped up. India has actually stepped in to buy it, used to buy

Uh And, and Seaborne exports about 3, 3.5 million barrels per day of refined products exports have all found homes outside Europe. So China and India have stepped up. India has actually stepped in to buy it, used to buy

next to zero. Russian crude, the Ukraine. So you China and India are lapping up the vast majority of Russian crude. It's refined products have been routed into markets like Brazil, Brazil has become a major importer of Russian diesel. Russia, Brazil used to depend quite a bit on the US for diesel. So you see, you know, you can just picture all that the rewiring that's gone on, right? And, and it it's it's quite massive. So

next to zero. Russian crude, the Ukraine. So you China and India are lapping up the vast majority of Russian crude. It's refined products have been routed into markets like Brazil, Brazil has become a major importer of Russian diesel. Russia, Brazil used to depend quite a bit on the US for diesel. So you see, you know, you can just picture all that the rewiring that's gone on, right? And, and it it's it's quite massive. So

um us used to export diesel to Brazil, some of which has has obviously been edged out by Russia. So us has been exporting more diesel to Europe. In turn Russian refined products have also made inroads into, into parts of Africa and even actually in the Middle East. So

um us used to export diesel to Brazil, some of which has has obviously been edged out by Russia. So us has been exporting more diesel to Europe. In turn Russian refined products have also made inroads into, into parts of Africa and even actually in the Middle East. So

all of this has happened. Uh basically the dust has settled on this day or so. Um as we stand today and even through 2023 what may happen as a result of Western sanctions and even price gap on Russia and the fears and the apprehensions related to that are all in the rearview mirror.

all of this has happened. Uh basically the dust has settled on this day or so. Um as we stand today and even through 2023 what may happen as a result of Western sanctions and even price gap on Russia and the fears and the apprehensions related to that are all in the rearview mirror.

But brother, I remember in that summer of 2022 there were all these oil bulls who are saying global refining capacity is at a stretch because there hasn't been that much capa uh you uh she producers who were telling the Congress don't uh you know, force us to, you know, make budgets about increasing production. Uh We can because we don't have enough labor, we don't have enough equipment. There's not on rigs, et cetera. So how did the industry get that,

But brother, I remember in that summer of 2022 there were all these oil bulls who are saying global refining capacity is at a stretch because there hasn't been that much capa uh you uh she producers who were telling the Congress don't uh you know, force us to, you know, make budgets about increasing production. Uh We can because we don't have enough labor, we don't have enough equipment. There's not on rigs, et cetera. So how did the industry get that,

so to speak wrong? And then within six months, we saw supply side start to revive in a pretty dramatic manner.

so to speak wrong? And then within six months, we saw supply side start to revive in a pretty dramatic manner.

Yeah. So I wouldn't say the numbers were, weren't wrong. They had a point. Those who were expressing concern that perhaps global refining capacity was not adequate did have a point because we saw quite a dramatic act

Yeah. So I wouldn't say the numbers were, weren't wrong. They had a point. Those who were expressing concern that perhaps global refining capacity was not adequate did have a point because we saw quite a dramatic act

acceleration in the shutdown, permanent moth balling of refining capacity across the globe. Of course, mostly in smaller, less profitable, low complexity refineries around the world. Um It had been, it was a phenomenon pre COVID, it was accelerated after COVID. So between 2019,

acceleration in the shutdown, permanent moth balling of refining capacity across the globe. Of course, mostly in smaller, less profitable, low complexity refineries around the world. Um It had been, it was a phenomenon pre COVID, it was accelerated after COVID. So between 2019,

um to let's say to end 2022 or so, we saw about 4.4 million barrels per day of global refining capacity permanently shut.

um to let's say to end 2022 or so, we saw about 4.4 million barrels per day of global refining capacity permanently shut.

Uh So, and you know, that was a, that was a substantial number. What has and, and the period that you're talking about was there were there were periods of crunch time, phases of crunch time, I would say through 22 and 23 when this ring of product flows was going on and mind you Russia as a major exporter of diesel.

Uh So, and you know, that was a, that was a substantial number. What has and, and the period that you're talking about was there were there were periods of crunch time, phases of crunch time, I would say through 22 and 23 when this ring of product flows was going on and mind you Russia as a major exporter of diesel.

So diesel was the sort of focal point of these worries, you know, nearly a million barrels per day of diesel is exported by Russia. And as you know before this rewiring was was complete, there was concern obviously in Europe that you know, would there be enough diesel available in in Europe. And to some extent, it was also linked to Europe's

So diesel was the sort of focal point of these worries, you know, nearly a million barrels per day of diesel is exported by Russia. And as you know before this rewiring was was complete, there was concern obviously in Europe that you know, would there be enough diesel available in in Europe. And to some extent, it was also linked to Europe's

fears over adequate gas supply. So we do know that Europe has also lost since 2022 a big chunk of pipeline gas supply from Russia. And when um in in periods of distress, when gas prices are too high, there's not enough supply. Diesel is a product that is uh of, you know, the product of choice for switching. So all of this created a sort of a perfect storm around diesel if you will.

fears over adequate gas supply. So we do know that Europe has also lost since 2022 a big chunk of pipeline gas supply from Russia. And when um in in periods of distress, when gas prices are too high, there's not enough supply. Diesel is a product that is uh of, you know, the product of choice for switching. So all of this created a sort of a perfect storm around diesel if you will.

And that's what links to this uh concern now, quite a distinct phenomenon. Um That is equally worth noting when we, when we talk about the refining capacity

And that's what links to this uh concern now, quite a distinct phenomenon. Um That is equally worth noting when we, when we talk about the refining capacity

uh globally is that uh we are now in a wave of major growth in refining capacity and and thank God for that. So between roughly 2023 and 2027 so some of this capacity that I'm talking about yet has to come on stream. But between these years, um we have nearly the same amount. So about 4.3 million barrels per day of new refining capacity coming on stream.

uh globally is that uh we are now in a wave of major growth in refining capacity and and thank God for that. So between roughly 2023 and 2027 so some of this capacity that I'm talking about yet has to come on stream. But between these years, um we have nearly the same amount. So about 4.3 million barrels per day of new refining capacity coming on stream.

Uh So I would say that for the foreseeable future, uh uh refining capacity shortage is not going to be a major problem. Um Another shift that has happened with this is, as I mentioned, it's the less profitable, uh less efficient, older, simpler refineries that shut down and what is coming on stream in countries like China, a lot of it in the Middle East. Um Nigeria, a major refinery started

Uh So I would say that for the foreseeable future, uh uh refining capacity shortage is not going to be a major problem. Um Another shift that has happened with this is, as I mentioned, it's the less profitable, uh less efficient, older, simpler refineries that shut down and what is coming on stream in countries like China, a lot of it in the Middle East. Um Nigeria, a major refinery started

up there in Mexico. The D Os Bocas refinery um is all of these refineries are closer to the demand centers. And I think I should have mentioned it in, in the reverse order is that they are much bigger. So they are mega refineries, they have economies of scale, they are higher complexity.

up there in Mexico. The D Os Bocas refinery um is all of these refineries are closer to the demand centers. And I think I should have mentioned it in, in the reverse order is that they are much bigger. So they are mega refineries, they have economies of scale, they are higher complexity.

Um And they're closer to the demand centers. In the case of Middle East, they are close to the production center of the feedstock as well. So all of them are going to be um you know, definitely far more effective, more efficient. Um And I think going forward, I would say with the short to medium term, um I don't see a problem on that account. Uh possibly uh if we had to look beyond the next, let's say five years into next decade even

Um And they're closer to the demand centers. In the case of Middle East, they are close to the production center of the feedstock as well. So all of them are going to be um you know, definitely far more effective, more efficient. Um And I think going forward, I would say with the short to medium term, um I don't see a problem on that account. Uh possibly uh if we had to look beyond the next, let's say five years into next decade even

uh there is a view that this current wave of capacity is probably the last wave we are seeing. Uh so if oil demand globally continues to remain robust, if not rise, um and not follow the sort of extreme decline that some forecasters are talking about. Like then we may be in a period of not enough refining capacity again, you know, potentially sometime in the next decade.

uh there is a view that this current wave of capacity is probably the last wave we are seeing. Uh so if oil demand globally continues to remain robust, if not rise, um and not follow the sort of extreme decline that some forecasters are talking about. Like then we may be in a period of not enough refining capacity again, you know, potentially sometime in the next decade.

OK. Uh The rewiring story, I I find it so fascinating and we have two very large energy importers, India and China, how have their energy import orientation switched uh to uh to Russia and the Middle East over the last two years.

OK. Uh The rewiring story, I I find it so fascinating and we have two very large energy importers, India and China, how have their energy import orientation switched uh to uh to Russia and the Middle East over the last two years.

So uh China was always uh a major customer for Russia. Uh in fact, uh in the years just before COVID and um possibly just after that as well.

So uh China was always uh a major customer for Russia. Uh in fact, uh in the years just before COVID and um possibly just after that as well.

Um Russia and Saudi Arabia had been neck and neck in terms of um being number one and number two, supplier of crude to, to China and Russia had actually overtaken Saudi Arabia in a few years. So um China

Um Russia and Saudi Arabia had been neck and neck in terms of um being number one and number two, supplier of crude to, to China and Russia had actually overtaken Saudi Arabia in a few years. So um China

um as I mentioned a pipeline, so it sort of it, it there's a um about 800,000 barrels per day of crude that it gets from from Russia, you know, that is not subject to the to the spot market or the vagaries of, of pricing and, and shipping and so on.

um as I mentioned a pipeline, so it sort of it, it there's a um about 800,000 barrels per day of crude that it gets from from Russia, you know, that is not subject to the to the spot market or the vagaries of, of pricing and, and shipping and so on.

And China also takes a lot of Seaborne crude imports from from Russia. Um India as I mentioned earlier was taking zero crude from Russia and uh started lapping up now and, and, and very quickly, um, ramped up the volumes it was taking as well. Now, both of these countries are price sensitive, of course. And you know, if they were being

And China also takes a lot of Seaborne crude imports from from Russia. Um India as I mentioned earlier was taking zero crude from Russia and uh started lapping up now and, and, and very quickly, um, ramped up the volumes it was taking as well. Now, both of these countries are price sensitive, of course. And you know, if they were being

offer discounted crude at, at times, Russian crude was going at a discount of as much as $25 a barrel which, you know, had given those prices. It was almost 25% discount was a great deal for Refiners in those two countries. So if you look at 2023 India and China have together bought an average of about 3.8 million barrels per day of Russian crude, which is um

offer discounted crude at, at times, Russian crude was going at a discount of as much as $25 a barrel which, you know, had given those prices. It was almost 25% discount was a great deal for Refiners in those two countries. So if you look at 2023 India and China have together bought an average of about 3.8 million barrels per day of Russian crude, which is um

up almost 65%. Uh but a big chunk of this growth has actually been India. So Indian crude imports in 23 were up 165% over 2022. Uh So 2022 it had just made a beginning and it was ramping up. Uh what the numbers illustrate is that that

up almost 65%. Uh but a big chunk of this growth has actually been India. So Indian crude imports in 23 were up 165% over 2022. Uh So 2022 it had just made a beginning and it was ramping up. Uh what the numbers illustrate is that that

ramp up continued pretty much through 2023. It was only towards the end of 2023 that when Russian crude became a bit pricier, uh the the discount started narrowing, that we actually saw Indian imports or from, from Russia starting to decline a little bit. So again,

ramp up continued pretty much through 2023. It was only towards the end of 2023 that when Russian crude became a bit pricier, uh the the discount started narrowing, that we actually saw Indian imports or from, from Russia starting to decline a little bit. So again,

that also tells you that India will buy happily from Russia. It's, it's, it's not concerned about sanctions and well, there are no sanctions against India buying Russian crude. Let's be very clear about that, but it will continue buying. But as long as it makes sense economically, so this is not a political decision, it's a completely commercial decision for India.

that also tells you that India will buy happily from Russia. It's, it's, it's not concerned about sanctions and well, there are no sanctions against India buying Russian crude. Let's be very clear about that, but it will continue buying. But as long as it makes sense economically, so this is not a political decision, it's a completely commercial decision for India.

Speaking of commercial decisions, is it also the case that India has become a very large exporter of refined petroleum goods to Europe, basically to your point, huge import of Russian crude and then it actually ends up in Europe,

Speaking of commercial decisions, is it also the case that India has become a very large exporter of refined petroleum goods to Europe, basically to your point, huge import of Russian crude and then it actually ends up in Europe,

you know, and thanks for asking that question, Timor, it's it this this issue gets is has been heavily politicized, it's got overblown a bit. Um So yes, uh India has a marginal surplus refining capacity.

you know, and thanks for asking that question, Timor, it's it this this issue gets is has been heavily politicized, it's got overblown a bit. Um So yes, uh India has a marginal surplus refining capacity.

Uh But what I mean by that is that, you know, it's got a huge growing captive market at home, right? So pretty much its refining capacity is spoken for in terms of domestic fuel sales. Uh So, you know, contrasted with China, for instance, which has way more surplus capacity. So if China consumes, let's say 15 million barrels per day,

Uh But what I mean by that is that, you know, it's got a huge growing captive market at home, right? So pretty much its refining capacity is spoken for in terms of domestic fuel sales. Uh So, you know, contrasted with China, for instance, which has way more surplus capacity. So if China consumes, let's say 15 million barrels per day,

its current refining capacity is around 18, more than 18 million barrels per day growing as we speak, you know, new and new refineries being put on stream. So, so India is not quite on that scale. And so yes, it had the Refiners had a little bit of room, it's mostly the two private Refiners in the country, you know, reliance industries in Naara, the state Refiners

its current refining capacity is around 18, more than 18 million barrels per day growing as we speak, you know, new and new refineries being put on stream. So, so India is not quite on that scale. And so yes, it had the Refiners had a little bit of room, it's mostly the two private Refiners in the country, you know, reliance industries in Naara, the state Refiners

pretty much um cater to the domestic market. So yes, Indian exports of refined products to the to Europe and to some other parts of the world also went up a little bit last year. But really at the end of the day, India has very little scope to increase because first and foremost, and the government will make sure that the domestic market is well supplied

pretty much um cater to the domestic market. So yes, Indian exports of refined products to the to Europe and to some other parts of the world also went up a little bit last year. But really at the end of the day, India has very little scope to increase because first and foremost, and the government will make sure that the domestic market is well supplied

uh before any surplus is uh exported. Um externally,

uh before any surplus is uh exported. Um externally,

uh w what about fundamentals based demand before this Red Sea issue became prominent, I'm sure you were busy writing your 2024 outlook and you were assessing demand around the world from my sort of economics vantage point. I don't really see that much upside to the global economy in 2024

uh w what about fundamentals based demand before this Red Sea issue became prominent, I'm sure you were busy writing your 2024 outlook and you were assessing demand around the world from my sort of economics vantage point. I don't really see that much upside to the global economy in 2024

with a bit of a soft landing projected for the US India is one shining exception. But after that, you know, China cause lots of uncertainty and these are the big marginal importers, Europe also forecast to remain rather flat. So does that sort of, you know map with your view of oil demand?

with a bit of a soft landing projected for the US India is one shining exception. But after that, you know, China cause lots of uncertainty and these are the big marginal importers, Europe also forecast to remain rather flat. So does that sort of, you know map with your view of oil demand?

Yeah, so Timor, the global economic prospects that uh you are zeroing in on is exactly the what is shaping the outlook for the global oil market as well. So um for oil, there's a pretty direct connection. Of course, there's plenty of dots in between that need to be connected. But nonetheless, a connection definitely between

Yeah, so Timor, the global economic prospects that uh you are zeroing in on is exactly the what is shaping the outlook for the global oil market as well. So um for oil, there's a pretty direct connection. Of course, there's plenty of dots in between that need to be connected. But nonetheless, a connection definitely between

the health of the global economy and the health of global oil demand and oil demand growth. So we are now contemplating a second year of global economic deceleration, right?

the health of the global economy and the health of global oil demand and oil demand growth. So we are now contemplating a second year of global economic deceleration, right?

Um And then we have within that uh you know, you, you tend to look at, OK, what's going to happen um most likely in the US, in terms of economic momentum, what's happening in OECD Europe and what's happening in China. So just for the sake of sort of simplification, you know, so

Um And then we have within that uh you know, you, you tend to look at, OK, what's going to happen um most likely in the US, in terms of economic momentum, what's happening in OECD Europe and what's happening in China. So just for the sake of sort of simplification, you know, so

when we talk about global economy and global oil demand, you then as a next step, the oil market participants tend to um zero in on, on these three regions. And um so you look at the US economy, OK. Perhaps a soft landing, I think a lot depends on what the FED does with the interest rate,

when we talk about global economy and global oil demand, you then as a next step, the oil market participants tend to um zero in on, on these three regions. And um so you look at the US economy, OK. Perhaps a soft landing, I think a lot depends on what the FED does with the interest rate,

um whether it cuts or not and so and so on. Um Eurozone or let's say OECD Europe uh not in as good a position as the US. Uh You know, we saw an ECB official saying in Davos on the sidelines yesterday, for instance, that

um whether it cuts or not and so and so on. Um Eurozone or let's say OECD Europe uh not in as good a position as the US. Uh You know, we saw an ECB official saying in Davos on the sidelines yesterday, for instance, that

um do not bet on interest rate cuts. Uh because I think it's, it appears that uh inflation is a, is a far bigger problem, more stubborn in, in Europe. And then you come to, to China and you know, I we'll talk a little more about that separately. But for a moment, let's just take these three regions together, right? If you look at the US, uh Western Europe and Chinese oil consumption,

um do not bet on interest rate cuts. Uh because I think it's, it appears that uh inflation is a, is a far bigger problem, more stubborn in, in Europe. And then you come to, to China and you know, I we'll talk a little more about that separately. But for a moment, let's just take these three regions together, right? If you look at the US, uh Western Europe and Chinese oil consumption,

the three of them together account for 50% of global oil demand.

the three of them together account for 50% of global oil demand.

So that gives you so the remaining 50%. This is the other important attribute to keep in mind, the remaining 50% is distributed amongst much, much, much smaller consumers. And the reason it's important to keep that in mind is that even if some of those consumers India, for instance, are going to see a strong economic growth, a strong oil demand growth, none of them are going to be the

So that gives you so the remaining 50%. This is the other important attribute to keep in mind, the remaining 50% is distributed amongst much, much, much smaller consumers. And the reason it's important to keep that in mind is that even if some of those consumers India, for instance, are going to see a strong economic growth, a strong oil demand growth, none of them are going to be the

engines of global oil demand growth. Like let's say the China was in the nineties and the early two thousands, right? So just look at China and India for instance, the second and the third largest oil consumer and and what a big gap between their consumption. So China consumes a little over 15 million barrels per day. India consumes 5 million barrels per day. And if you were to line up the next seven major consumer

engines of global oil demand growth. Like let's say the China was in the nineties and the early two thousands, right? So just look at China and India for instance, the second and the third largest oil consumer and and what a big gap between their consumption. So China consumes a little over 15 million barrels per day. India consumes 5 million barrels per day. And if you were to line up the next seven major consumer

in the next 10 consumers of oil, you'll find that oil consumption globally is is split into much smaller consumers. So basically that that gives you a smaller base of growth. So, so this is what so so when the oil market participants contemplate 2024 they're looking at ok, economy, softening, most likely oil demand growth in China, so growth it will grow, but the growth itself is softening.

in the next 10 consumers of oil, you'll find that oil consumption globally is is split into much smaller consumers. So basically that that gives you a smaller base of growth. So, so this is what so so when the oil market participants contemplate 2024 they're looking at ok, economy, softening, most likely oil demand growth in China, so growth it will grow, but the growth itself is softening.

Um we estimate China uh Chinese oil demand grew by like about 900,000 barrels per day um year on year, last year, this year, perhaps about half a million barrels per day.

Um we estimate China uh Chinese oil demand grew by like about 900,000 barrels per day um year on year, last year, this year, perhaps about half a million barrels per day.

The Western Europe and us actually present an interesting contrast. So both these countries, not just by virtue of their economies, but mature economies, but also by virtue of, of demographics are actually well past their peak oil demand. And you know, that's very, very clear in the data that we have in front of us. So

The Western Europe and us actually present an interesting contrast. So both these countries, not just by virtue of their economies, but mature economies, but also by virtue of, of demographics are actually well past their peak oil demand. And you know, that's very, very clear in the data that we have in front of us. So

if we for the whole world and a lot of the countries we tend to talk about, OK, so where is this country or the global oil demand today or in 2023 versus where it was in 2019? Right? We we tend to go with like so has the, has the COVID demand destruction been made up for? So yes, on a global level, it has. So in 2023 global oil demand for the first time

if we for the whole world and a lot of the countries we tend to talk about, OK, so where is this country or the global oil demand today or in 2023 versus where it was in 2019? Right? We we tend to go with like so has the, has the COVID demand destruction been made up for? So yes, on a global level, it has. So in 2023 global oil demand for the first time

climbed above 2019 demand. So, but if you look at us and Western Europe together, the two regions are about 1.6 million barrels per day lower in terms of oil consumption than when they were

climbed above 2019 demand. So, but if you look at us and Western Europe together, the two regions are about 1.6 million barrels per day lower in terms of oil consumption than when they were

in 2019. And the path forward for them is like is probably between flat stagnation in a best case economic growth scenario to perhaps a continuing downward decline. If the economies are struggling to grow.

in 2019. And the path forward for them is like is probably between flat stagnation in a best case economic growth scenario to perhaps a continuing downward decline. If the economies are struggling to grow.

Fascinating and sort of tells you that some offsets here and there. But those three chunks are the key determining factors as far as you know, energy market is concerned. But we want to talk a little bit about the medium term off and you in fact started touching on this. But I want to talk specifically with respect to OPEC. Uh in the last year, we've seen OPEC try super hard to rein in on all production. And even though the US government has been putting pressure on the Southeast and others

Fascinating and sort of tells you that some offsets here and there. But those three chunks are the key determining factors as far as you know, energy market is concerned. But we want to talk a little bit about the medium term off and you in fact started touching on this. But I want to talk specifically with respect to OPEC. Uh in the last year, we've seen OPEC try super hard to rein in on all production. And even though the US government has been putting pressure on the Southeast and others

to keep the global oil market well supplied, I think they only had limited success. Maybe the softening demand aspect that you've been talking about played a more pivotal role in stabilizing oil prices than

to keep the global oil market well supplied, I think they only had limited success. Maybe the softening demand aspect that you've been talking about played a more pivotal role in stabilizing oil prices than

the, the US pressure on OPEC. Um So what is the medium term for OPEC? Does it survive in the way it is?

the, the US pressure on OPEC. Um So what is the medium term for OPEC? Does it survive in the way it is?

That's a million dollar question. Uh So, Opec Plus, uh the market perspective, uh expectations of OPEC plus, I would say have undergone quite a dramatic shift.

That's a million dollar question. Uh So, Opec Plus, uh the market perspective, uh expectations of OPEC plus, I would say have undergone quite a dramatic shift.

Um I would say from around the second half of last year. So, um the received wisdom through much of last year was that OPEC Plus was in control in command. Um It was quite cohesive uh under the leadership of Saudi Arabia or, you know, sort of joint leadership of Russia and Saudi Arabia, the two biggest producers within that.

Um I would say from around the second half of last year. So, um the received wisdom through much of last year was that OPEC Plus was in control in command. Um It was quite cohesive uh under the leadership of Saudi Arabia or, you know, sort of joint leadership of Russia and Saudi Arabia, the two biggest producers within that.

Um It was quite determined and capable of putting a floor under prices. Um If that's what it needed to do, um You know, if there was downward pressure. And for much of last year, actually, that was borne out. So we saw OPEC Plus coming together last April announcing cuts from May

Um It was quite determined and capable of putting a floor under prices. Um If that's what it needed to do, um You know, if there was downward pressure. And for much of last year, actually, that was borne out. So we saw OPEC Plus coming together last April announcing cuts from May

and um they managed to, to sort of avert a slide in prices, especially during the times when economic fears were starting to, to swirl around in the markets.

and um they managed to, to sort of avert a slide in prices, especially during the times when economic fears were starting to, to swirl around in the markets.

What has changed I would say towards the latter half of last year is that some things, some tensions, some problems within that alliance, within its ideology, its strategy have have come to the surface. Um A major one of which is that the, when it instituted cuts starting last May, it made a major departure from convention.

What has changed I would say towards the latter half of last year is that some things, some tensions, some problems within that alliance, within its ideology, its strategy have have come to the surface. Um A major one of which is that the, when it instituted cuts starting last May, it made a major departure from convention.

So the convention for OPEC plus uh you know, since it came together as, as this alliance and before that, for OPEC has been to set an overall target for the whole alliance. And then that if let's say the target is being increased or it's being

So the convention for OPEC plus uh you know, since it came together as, as this alliance and before that, for OPEC has been to set an overall target for the whole alliance. And then that if let's say the target is being increased or it's being

paid back, then that amount is equitably distributed between all the members. And then everything is transparent, which, you know, as we both know is very, very important for markets. If you're trying to send a strong signal to the markets, the markets need to see the numbers, right?

paid back, then that amount is equitably distributed between all the members. And then everything is transparent, which, you know, as we both know is very, very important for markets. If you're trying to send a strong signal to the markets, the markets need to see the numbers, right?

Um So then they would publish that this is our overall target, this is the individual members quotas. Um And then they would have regular meetings to assess how they were doing against those targets. The members that were let's say not complying were, you know, would, would get a sort of a, a rap on the knuckle that, you know, please get in, fall in line. And so on the departure last year was that they did away with this convention. Um,

Um So then they would publish that this is our overall target, this is the individual members quotas. Um And then they would have regular meetings to assess how they were doing against those targets. The members that were let's say not complying were, you know, would, would get a sort of a, a rap on the knuckle that, you know, please get in, fall in line. And so on the departure last year was that they did away with this convention. Um,

and they, so there's out of the 22 members until the end of last December. Now there's 21 because Angola has quit. But of the 22 members, 19 members were participating in these uh in these pacts, right? But of those only nine members came up with what was called voluntary cuts. They were not announced the usual way with a, with a full ministerial meeting and everything then officially published. But each country made an announcement saying we are doing these voluntary cuts. Now,

and they, so there's out of the 22 members until the end of last December. Now there's 21 because Angola has quit. But of the 22 members, 19 members were participating in these uh in these pacts, right? But of those only nine members came up with what was called voluntary cuts. They were not announced the usual way with a, with a full ministerial meeting and everything then officially published. But each country made an announcement saying we are doing these voluntary cuts. Now,

such voluntary cuts are not unheard of, but usually they have been used by Saudi Arabia and as an ad hoc mechanism, you know, sort of like a, a stop gap arrangement if you will. Uh But as it turned out last November, it, I, I feel they were probably trying to get back to their track to their, to their conventional way.

such voluntary cuts are not unheard of, but usually they have been used by Saudi Arabia and as an ad hoc mechanism, you know, sort of like a, a stop gap arrangement if you will. Uh But as it turned out last November, it, I, I feel they were probably trying to get back to their track to their, to their conventional way.

Um but a lot of tensions cropped up and they couldn't. And so now we have the situation in which these, you know, nine members have, um have come up with voluntary cuts. The other 10 peers are not cutting output. There's quite a bit of um uh

Um but a lot of tensions cropped up and they couldn't. And so now we have the situation in which these, you know, nine members have, um have come up with voluntary cuts. The other 10 peers are not cutting output. There's quite a bit of um uh

skepticism in the market. There's a lot of um doubts in the market as to whether, you know, these being voluntary cuts, to what extent the companies, sorry, the countries will abide by them, whether they will be uh you know, whether a discipline will be enforced and so on

skepticism in the market. There's a lot of um doubts in the market as to whether, you know, these being voluntary cuts, to what extent the companies, sorry, the countries will abide by them, whether they will be uh you know, whether a discipline will be enforced and so on

background of all of this uh sort of an old theme in the market but has cropped up all over again is also speculation that perhaps OPEC plus is just um sign some sort of a fatigue, you know, and it's probably maybe uh the beginning of the end of its market management policy.

background of all of this uh sort of an old theme in the market but has cropped up all over again is also speculation that perhaps OPEC plus is just um sign some sort of a fatigue, you know, and it's probably maybe uh the beginning of the end of its market management policy.

So all of this is is casting a huge shadow and, and if you look at last year, pretty much, it was OPEC Plus being disciplined, cutting back output and then the Saudi Energy Minister, you know, every now and then sort of um warning uh speculators not to short oil and, and all of that came together to hold a sort of a floor on prices. Uh you know, let's call it $80. That was the um

So all of this is is casting a huge shadow and, and if you look at last year, pretty much, it was OPEC Plus being disciplined, cutting back output and then the Saudi Energy Minister, you know, every now and then sort of um warning uh speculators not to short oil and, and all of that came together to hold a sort of a floor on prices. Uh you know, let's call it $80. That was the um

uh market expectation that that's where OPEC was trying to put a flaw, but all of that has now disappeared. So the market doesn't have the confidence now or the expectation um that OPEC Plus will be able to continue cutting even deeper if need be. So just to take an a quick example from what's happening right now, so last November, they decided that they will uh cut an additional line

uh market expectation that that's where OPEC was trying to put a flaw, but all of that has now disappeared. So the market doesn't have the confidence now or the expectation um that OPEC Plus will be able to continue cutting even deeper if need be. So just to take an a quick example from what's happening right now, so last November, they decided that they will uh cut an additional line

1000 barrels per day. But they announced that just for the current quarter, what's going to happen after this quarter, you know, has been sort of, uh, is up in the air or has been, you know, left for the market to guess. So that's also all adding, basically, it's become what in the market is traditionally called an OPEC put, right, like no matter what OPEC will do something to, um, to put a floor under prices, to prevent prices from, from entering a downward spiral that OPEC put has disappeared from the market.

1000 barrels per day. But they announced that just for the current quarter, what's going to happen after this quarter, you know, has been sort of, uh, is up in the air or has been, you know, left for the market to guess. So that's also all adding, basically, it's become what in the market is traditionally called an OPEC put, right, like no matter what OPEC will do something to, um, to put a floor under prices, to prevent prices from, from entering a downward spiral that OPEC put has disappeared from the market.

Indeed. OK. The other big player, of course in the oil market and which has also seen game changing developments over the past decade is the US uh some comments on the future of the shale industry in the US.

Indeed. OK. The other big player, of course in the oil market and which has also seen game changing developments over the past decade is the US uh some comments on the future of the shale industry in the US.

Yeah. So I think um once you start with the sort of phenomenal and highly unexpected spot in growth that we saw in the US last year in 2023 the US production grew by about 1.1 million barrels per day to a new all time high of about 12.9 million barrels per day.

Yeah. So I think um once you start with the sort of phenomenal and highly unexpected spot in growth that we saw in the US last year in 2023 the US production grew by about 1.1 million barrels per day to a new all time high of about 12.9 million barrels per day.

Now, um it was unexpected because if you, if you look at all the other data and evidence that you have in the shale sector. So, so for instance, what the shale producers, for instance, when what what their executives are saying are signaling to the market when they come out with their quarterly results, you look at what's happening to R counts to fracturing fleets and so on.

Now, um it was unexpected because if you, if you look at all the other data and evidence that you have in the shale sector. So, so for instance, what the shale producers, for instance, when what what their executives are saying are signaling to the market when they come out with their quarterly results, you look at what's happening to R counts to fracturing fleets and so on.

And the um sort of unchanging theme there has been that they are funneling more and more of their profits into paying off debt into rewarding shareholders doing share buybacks. Uh provide um you know, distributing good dividends and not so much of their profit into growing production.

And the um sort of unchanging theme there has been that they are funneling more and more of their profits into paying off debt into rewarding shareholders doing share buybacks. Uh provide um you know, distributing good dividends and not so much of their profit into growing production.

Um A lot of yes Capex did, did go up last year, but a lot of that, it was also taken up by uh higher costs. So, you know, inflation affected everything from manpower to r costs to the materials used in, in the shale sector and so on. Now, that story hasn't changed. Uh doesn't remains the same in 2024.

Um A lot of yes Capex did, did go up last year, but a lot of that, it was also taken up by uh higher costs. So, you know, inflation affected everything from manpower to r costs to the materials used in, in the shale sector and so on. Now, that story hasn't changed. Uh doesn't remains the same in 2024.

Uh uh There's a lot of consolidation that's also happening in the shield sector. We saw that with some with mega mergers at the end of last year. Um mega big purchases, Bon Mo and, and Chevron, uh the consolidation story will, will continue. Um That is another reason um we expect uh production to be sort of continued in a

Uh uh There's a lot of consolidation that's also happening in the shield sector. We saw that with some with mega mergers at the end of last year. Um mega big purchases, Bon Mo and, and Chevron, uh the consolidation story will, will continue. Um That is another reason um we expect uh production to be sort of continued in a

moderate growth phase but not in a in sort of, we don't expect companies to be prioritizing growth. Um So 2024 currently, the expectations are maybe it will continue to grow into to yet another new high, but perhaps by you know, a much less amount than last year, perhaps about 4 to 500,000 barrels per day.

moderate growth phase but not in a in sort of, we don't expect companies to be prioritizing growth. Um So 2024 currently, the expectations are maybe it will continue to grow into to yet another new high, but perhaps by you know, a much less amount than last year, perhaps about 4 to 500,000 barrels per day.

Ok. Uh And us especially with the inflation Reduction Act uh has really uh turbocharged its green transition process. Europe is coming up with regular new regulations on border adjustment tax and targets

Ok. Uh And us especially with the inflation Reduction Act uh has really uh turbocharged its green transition process. Europe is coming up with regular new regulations on border adjustment tax and targets

for greening their economy. China is, you know, again going on all cylinders uh in embracing EVs and green energy and so on. So, but maybe we conclude on that key issue that how does demand for conventional energy look with the green transition in the night?

for greening their economy. China is, you know, again going on all cylinders uh in embracing EVs and green energy and so on. So, but maybe we conclude on that key issue that how does demand for conventional energy look with the green transition in the night?

Yes. So it's um a, a key transition that is enveloping the energy markets across the globe.

Yes. So it's um a, a key transition that is enveloping the energy markets across the globe.

Um I think what doesn't help is that, of course, it's a highly emotive issue. It's highly politicized. Um There, in recent years, we've seen this major tension crop up between the so called global south and the global north. Um We saw that kind of um in play at cop 28 late last year.

Um I think what doesn't help is that, of course, it's a highly emotive issue. It's highly politicized. Um There, in recent years, we've seen this major tension crop up between the so called global south and the global north. Um We saw that kind of um in play at cop 28 late last year.

Uh but, but, but let me sort of summarize it in this way. So this shift away from fossil fuels and, you know, certainly coal, oil and gas, I would say to a much smaller and slower extent, but the shift is happening. It's just not, I don't see it happening at the speed as what some of the most optimistic projections out there have

Uh but, but, but let me sort of summarize it in this way. So this shift away from fossil fuels and, you know, certainly coal, oil and gas, I would say to a much smaller and slower extent, but the shift is happening. It's just not, I don't see it happening at the speed as what some of the most optimistic projections out there have

trade for the simple reason that, you know, energy is like so crucial, underpinning our lives, our lifestyles, our economies, our very existence that it's, it's just not, it's hard to fathom how we could simply jettison oil and gas and for that, for that matter, coal before we have alternatives that are available on the same scale

trade for the simple reason that, you know, energy is like so crucial, underpinning our lives, our lifestyles, our economies, our very existence that it's, it's just not, it's hard to fathom how we could simply jettison oil and gas and for that, for that matter, coal before we have alternatives that are available on the same scale

um and are affordable and accessible. So we see, you know that between this debate between the global South and the global north part of that is also uh the emphasis on energy security affordability,

um and are affordable and accessible. So we see, you know that between this debate between the global South and the global north part of that is also uh the emphasis on energy security affordability,

the accessibility we know here in Asia, that's key for, for policymakers. So all of that, you know, combined with the fact that at the same time, there is an acknowledgement and a realization that we do have to reduce, continue reducing our