Book a demo and get a free trial here.<\/a><\/em><\/p>\n <\/p>\n
TN:<\/strong>\u00a0So you brought up OPEC. There’s been news this week around OPEC+ and a deal with Saudi and UAE and some other Middle East dynamics. What’s your view on that? How much downward pressure will that put on crude markets?<\/p>\n <\/p>\n
TS:<\/strong> Because of those factors in the Middle East, because I am of a belief we will see a deal and we will get some more barrels on the market, the market is actually very tight right now. But we’re also having lockdowns in some places in Asia. So right now, we already are seeing a pullback in crude.\u00a0Until we get a little bit more certain that 65-75 range will probably hold us for a while, I see some consolidation there and after $115 move from the lows last year, it makes sense for oil to chill out, consolidate here a little bit.<\/p>\n <\/p>\n
TN:<\/strong>\u00a0Sam, what’s your view on the kind of OPEC+, Saudi, UAE and other kind of OPEC countries wanting to tag along on the UAE?<\/p>\n <\/p>\n
SM:<\/strong> I think one issue that they themselves want to know is status of the JCPOA. They really want to know how much of an issue Iran would be if their balance come back to market. Now, that’s a big if.<\/p>\n <\/p>\n
But if we look at what happened during the Trump administration, the United States pulled out of the deal and that was not good optics for the U.S. side. But now what’s happened is that Iran is not complying with the deal. So the ball is now in their court instead. So the Biden administration is saying, yes, the United States wants to be part of the deal, even though it’s not a very popular deal in the US. I don’t see any popular support for it. It’s more of a let’s just get back in there so Iran can improve its compliance. But they’re not improving their compliance. Instead, what they’re doing is going the other direction and they’re increasing their enrichment. They’re becoming more brazen about how they move around the world with Navy vessels and so on.<\/p>\n
<\/p>\n
And now, of course, there’s an Iranian president that’s going to take office in August. So I think the deal will play fall apart instead because of the fact that Iran is not complying.<\/p>\n
<\/p>\n
TN:<\/strong>\u00a0If the deal falls apart, does that chaos help oil prices, meaning rise or does it create the perception that there will be a dramatically larger supply in the market?<\/p>\n <\/p>\n
SM:<\/strong> I think the initial reaction will be that, “Oh, these barrels are not going to be reentering the market, therefore the price will go higher.” So that’s the first automated response. But then, you know, the dust will begin to settle after a while when there’s an understanding of what kind of barrels are not entering the market.<\/p>\n <\/p>\n
So in Iran’s case, they are shipping sour crude. Whether it’s light or heavy, it’s sour. In order for that oil to become sweet, which is more attractive, you have to de-sulfur the oil. And so Iran, what they do is they give you a discount if you want to buy light sweet oil, but then they’re buying like sour oil. Iran gives $10 discount, for instance, and then they just remove the sulfur at the refinery at their own expense. And that’s what’s causing, for instance, West Africa to lower their exports. So moving out a lot less oil now out of Africa than before on account of China buying more Iranian oil instead.<\/p>\n
<\/p>\n
TS:<\/strong>\u00a0I think what people forget, there’s already a lot of Iranian oil on the market. So even if they came back at production of 4 to 4.5 million, it’s not really a lot of extra added barrels that are not already on the market.<\/p>\n <\/p>\n
SM:<\/strong> Exactly. And it will be absorbed by the demand that’s coming of course.<\/p>\n <\/p>\n
TN:<\/strong> But it seems to me the kind of perception of legitimacy that would come through JCPOA may calm prices down a bit through the kind of perception of legitimacy of that supply?<\/p>\n <\/p>\n
TS:<\/strong> Yeah. I mean, if it came to fruition, which I don’t foresee it, I have to agree with Sam on this point. But yeah, the market would think, oh, OK, we have all these barrels coming on even though there isn’t, and that it would be a numbers game from there, then you’d have to see supply and demand numbers from the various agencies monthly reports.<\/p>\n <\/p>\n
SM:<\/strong> And the thing also does not happen overnight. So even if the process of JCPOA happens and Biden finally signs, for instance, initially a waiver, the whole process takes forever to reboot again. We saw it last time.\u00a0Remember Tracy back in years ago, it took many months.<\/p>\n <\/p>\n
And also in the case of Iran, most of their domestic national fleet is tied up containing gas condensate. So they have around 70 million barrels of gas condensates floating. And that used up nearly all of the VLCC supertankers, the ones that can carry two million barrels. So what Iran has done is they put additional vessels, vintage VLCC. So now they have 200 vessels as opposed to 70. And those are the ones, the foreign flagged vessels that are moving the oil mostly to China.<\/p>\n
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TN:<\/strong>\u00a0You both mentioned lockdowns earlier in the conversation. And I think the tone here is that we have a pretty strong basis for rising crude prices. But we’ve seen some moves over the last week in the Netherlands and California and other places for maybe not full lockdowns, but more severe compliance with masks and other things and that seems to be leading toward potentially some lockdowns.\u00a0First of all, if there are lockdowns coming, what would be driving that? And we all know about the Delta variant and stuff. But are there political factors that would be driving that?\u00a0Second of all, if there were, how would that impact the six to nine month view of crude markets for you guys?<\/p>\n <\/p>\n
TS:<\/strong> The United States is so big, I don’t believe that they’re going to lock down the whole country again. It just won’t happen. You would literally have riots on the streets in some places. So I don’t foresee that happening. I could see some of the states like California just reinstated their mask mandates. I’ve been watching those states that kind of had more severe lockdowns to begin with like Michigan. If they’d lockdown again in the fall, that would probably be more politically motivated, but we’ll have to see what the numbers are and whatnot.<\/p>\n <\/p>\n
As far as my crude view, I’m very bullish on crude. But that doesn’t mean like I’m expecting a $100 tomorrow. How I’m invested is longer term. So I’m invested for at least the next five years or so.<\/p>\n
<\/p>\n
And I do believe that if we get through the fall and we don’t have lockdowns in the United States, Europe and Asia, then I definitely think six to nine months, we’re back in the swing of things, because that’ll put us right to basically next spring when oil demand really starts.<\/p>\n
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TN:<\/strong>\u00a0Sam, what’s your view in Europe on lockdowns? Do you see that stuff coming back and how do you see that impacting consumption?<\/p>\n <\/p>\n
SM:<\/strong>\u00a0I would think that it would be mostly in the countries with the high population density. Germany is obviously one of those countries and the UK is another. In other countries, not so much the case. I live here in Sweden. We never had lockdowns. So we had seniors living in retirement homes and so on. But then, we pretty much met the same statistic level as every other country — 10% population suffer through it, 1% or so perished as a result. But I don’t think that we’ll be seeing any big efforts on locking down countries again.<\/p>\n <\/p>\n
And what’s more interesting now is schools are coming up in a couple of months or at least a month and a half. Here in Sweden, life will pretty much continue as is. I have four kids and none of them missed more than a week of school, throughout the entire ordeal since 2020.<\/p>\n
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TN:<\/strong> So it sounds to me like you both see there may be some lockdowns at the edges, but it doesn’t sound like it’s something you expect to affect the mainstream. Maybe we see a slight dip in the rate of rise of demand. But it doesn’t sound like it’ll have a huge impact to the downside on energy prices generally, whether it’s crude or natgas or something like that. Is that fair to say?<\/p>\n <\/p>\n
SM:<\/strong> Yep.<\/p>\n <\/p>\n
TS:<\/strong> Absolutely.<\/p>\n <\/p>\n
TN:<\/strong> When it comes to natural gas, Tracy, I know you’ve been talking about that a lot lately. Can you tell us a little bit about your observations and your thesis and and what you’re seeing there?<\/p>\n <\/p>\n
TS:<\/strong> For natural gas, the reason I like it is it’s the great transition fuel especially for emerging markets, because it’s very inexpensive than to go straight into something like solar or wind just because the cost of those minerals and metals can make those are skyrocketing right now. So natural gas is abundant. It’s a great transition fuel. It’s cleaner burning than oil.<\/p>\n <\/p>\n
We just saw the EU green deal, they just stepped back and now are including that gas, whereas before there was no oil or gas, because I think they’re also realizing that it’s inexpensive, it’s a good transition fuel. If you look at Germany, there’s still a lot of coal going on in Germany. So for Europe, it’s not like fossil fuels are gone.<\/p>\n
<\/p>\n
I think they realize also it’s an inexpensive transition fuel. In particular for the United States, what I like right now is we’re seeing European natgas ETF and JKM, which is the Asian natgas, are trading at significantly higher than the United States is right now. And so I think there is opportunity there because the US can export and still come in at a lower cost, even with the cost of transportation to Europe or to Asia.<\/p>\n
<\/p>\n
TN:<\/strong> Interesting. Living in Texas, I have to say that I love that message. Sam, what about the tanker fleet? Is the global tanker fleet ready to to provide the capacity needed to power EMs with, say, American natgas or Middle Eastern natgas?<\/p>\n <\/p>\n
SM:<\/strong> So natgas, I haven’t checked too much. But tankers in general, the demand is not that great right now. When I say that, I mean that usually, they really step up to the plate whenever there’s a floating storage opportunity to talk about. So you had that case in Q2 of last year, and that really drove up the prices from the growing normal rate of 20,000 barrels a day to 500,000. That spike.<\/p>\n <\/p>\n
And it’s come down so much. Complete occupancy is far lower than what I normally see if I talk about the tonnage and it’s around under 40%, which is very little.\u00a0We were looking at April of last year, it was around north of 55, close to 60%. So that’s a big swing. And that really crushed the prices for tanker rates. They’re even negative. Below zero. But when I look at the transfers of illicit oil, it’s around $38,000 a day. So there’s a lot lot of money to be made in those transfers, unfortunately. But for nat-G, I’m not entirely sure. So I can’t say for sure.<\/p>\n
<\/p>\n
TN:<\/strong> OK, very good. Guys, thank you so much for your time. This has been really helpful. I’m really intrigued by kind of the long bull thesis for energy because we hope that we’re going to start recovering much quicker than we had been, which is fantastic. So thanks for your time. I really appreciate. Always, I really appreciate talking with you guys. Thanks very much.<\/p>\n","protected":false},"excerpt":{"rendered":"Energy commodities experts Tracy Shuchart and Sam Madani joined forces in this special #QuickHit episode to talk about crude, OPEC+, JCPOA, and how lockdowns will affect the market this year. Most importantly, how investors should plan? Tracy writes for a Hedge Fund Telemetry,\u00a0where she is the energy and material strategist. She also manages an […]<\/p>\n","protected":false},"author":1,"featured_media":41711,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[70],"tags":[29,411,572,576,671,48,968,971,1050,42,1072,1196,1462,1469,1753,1785,1971,2094,2216,2219,2227,2294,2310,2448,2559,2610,2621,2730,2731,2732,2750,2915,2954,2957,3216,3217,3219,3421,3423,3434,3435,3567,3681,3714,3740,3742,3800,39,3928,3983,4027,4166,4242,4408],"class_list":["post-41709","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-quickhit","tag-asia","tag-biden-and-uae","tag-california","tag-canada","tag-china","tag-complete-intelligence","tag-copper-forecast","tag-copper-forecast-for-2021","tag-crb","tag-crude-oil","tag-crude-oil-forecast-for-2021","tag-delta-variant","tag-etf","tag-eu","tag-future-of-crude-oil","tag-gas-prices","tag-hedge-fund-telemetry","tag-illicit-oil","tag-iran","tag-iran-crude","tag-iran-oil","tag-jcpoa","tag-jkm","tag-lockdowns","tag-mask-mandates","tag-michigan","tag-middle-east","tag-nat-gas","tag-nat-gas-prices","tag-natgas","tag-natural-gas","tag-oil-prices","tag-opec","tag-opec-plus","tag-quick-hit","tag-quick-hit-experts","tag-quickhit","tag-sam-madani","tag-samir-madani","tag-saudi","tag-saudi-arabia","tag-sour-crude","tag-sulfur-oil","tag-sweden","tag-tanker-trackers","tag-tankertrackers-com","tag-texas","tag-tracy-shuchart","tag-travel-restrictions","tag-uae","tag-united-states","tag-usa-and-iran","tag-vlcc","tag-wti-crude-oil-forecast"],"_links":{"self":[{"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/posts\/41709","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/comments?post=41709"}],"version-history":[{"count":0,"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/posts\/41709\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/completeintel.com\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/media?parent=41709"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/categories?post=41709"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/tags?post=41709"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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