You're listening to Strictly Business Podcast with Lindsay Williams.
The oil price is at a multi-week high,
but still only in the same sort of range that it was the end of October of 2025.
It's been stuck between $60 and $65 a barrel.
That's for Brent crude oil.
The last time I spoke to my guest today, it was around about $76, $77 a barrel.
He's Paul Gooden, Head of Natural Resources at Strictly.
at 91 in London, speaking to us incidentally from Jackson, Wyoming, where
he's attending a conference.
That's the same Jackson, Wyoming pool where they have the Jackson Hole affair
every year, isn't it?
You're right.
That's where the central bankers meet.
Yeah, exactly.
If we won't talk about central bankers at the moment, we're going to focus on oil.
And just when you thought it was safe to be an oil analyst again, along comes Iran.
How big a deal is the potential continuing conflict in Iran?
In Iran, I mean, potentially quite meaningful.
Iran has the third biggest oil reserves globally, you know, produces north of 3
million barrels a day.
And look, what tends to happen is if you get kind of regime change,
it tends to result in a lot of factionalization, a lot of infighting,
which results for a period at in reduced oil flows.
So I think what's going on in Iran at the moment is potentially quite bullish for
the oil price.
But of course, bear in mind,
President Trump wants to keep oil prices down because the US consumer is very
sensitive to high gasoline prices, particularly going into the midterm
elections in November.
So I think Trump wants to keep oil prices down.
But certainly if they were to kind of take action in Iran or if there was to be a
regime change,
I think that could be tactically quite bullish for the oil price.
Even without Trump though there is a lot going on in the country.
There have been anti-government protests mainly apparently because of the economy
raging inflation, the currency collapsing, etc.
But even without Trump something might happen and we cast our minds back to 1979
when the Shah of Iran was
deposed and an Islamic State was instated.
And that's going the opposite direction, because I noticed that the son of the Shah
of Iran has been touted as maybe going back.
A little bit fanciful in my opinion.
But if you go back to 79, if it were as momentous as that occasion,
then it really could be something quite meaningful for oil.
Yeah.
And look, you point to kind of succession and what happens next.
And therein is the problem is in the different groups and factions will have
different ideas about
how they think.
things should proceed.
And that creates instability, that sort of generally disrupts flows of oil.
So look, it's certainly something that we're keeping a close eye on.
Without Iran, we've had Venezuela.
Venezuela is an interesting one, because although it's got a lot of oil under the
ground and under the sea,
the fact is that that oil is sludge compared to Brent crude oil or West Texas.
So it's not quite as simple as that.
Maybe you could sort of encapsulate what's gone on
in Venezuela and what might happen to the oil price because of what's happened?
Yes.
So, you know, Venezuela, again, you know, very large reserves of oil, you know,
reportedly that the biggest reserves globally even more than Saudi.
But Venezuela doesn't produce a great deal.
It produces just below a million barrels a day.
The peak in the 1970s was sort of about three and a half, four million barrels a
day.
To put that into comparison, you know, Saudi produces about 10 million barrels a
day and the global market's about 100
million barrels a day.
So certainly Venezuela appears to be significantly underproducing relative to
the size of its reserves.
You're absolutely right.
Not all reserves are created equal.
A lot of the oil in Venezuela is so-called heavy oil.
Think of it as sort of peanut butter.
You need to put a lot of energy in to kind of get it to flow.
And then to kind of get it to move into pipelines, you need to to put diluent into
it.
So, you know, not the highest quality crude.
But what happens from here?
Trump had all the big US oil executives in the White House on Friday.
He's trying to corral them to invest more in the country.
The reality is I think most of them will stay on the sidelines until there is a
comprehensive framework on
security and around fiscal terms and about how...
how they're going to get access to dollars and to kind of get a return on their
investment.
Hopefully we'll kind of see that over the coming months in the meantime.
I think there is quite a lot that can be done to improve production just by getting
spare
parts into the country and by getting more personnel in the country and by giving
them access to diluent to
help the crew to flow.
So, you know, Most people are quite skeptical that Venezuela can increase
production in the near term.
My view is I think they can increase production by about half a million barrels
a day on a two to three year view.
So that's more optimistic view than I think most people,
but thereafter to get production up more meaningfully than that, I think it'll be
harder than people think.
It'll take a long time.
It'll take a lot of dollars.
But in the grand scheme of things, what's going on Venezuela is quite bearish for
the oil price because of course, you know,
more oil supply means lower prices.
And talking about bearishness, as I said in my introduction, the last time we
spoke, the oil price was in the high 70s. Okay,
it spiked to there and it came back down pretty quickly.
But it's been going down.
I'm just looking at the graph now of Brent crude.
It's been going down ever since.
And again, we've had a $5 spike recently because of Iran.
But it really does look like a market that's going nowhere.
It's either going to go sideways or down.
Again, that's my opinion.
I did see...
Paul, some pretty good trade figures coming out in the last few days for I
think the third quarter of last year.
And it was dominated by energy products.
So the tariff situation that emerged beginning of last year from the Trump
administration hasn't hit global
trade as much as people had feared.
People have adapted.
And that's obviously quite good for oil when it comes to economic activity.
Yeah, look, I mean, when it comes to the oil price, there are there are sort of
many moving parts to what's going on.
We referred to two of the geopolitical situations going on with Venezuela and
Iran, that the third one, of course, is Russia,
Ukraine.
I mean, to take a sort of step back, I would kind of sort of focus off what does
President Trump want over the next year or so.
And I would kind of say he has the sort of the political levers to kind of make that
happen.
And certainly he wants low oil prices in the first half of this year.
because that makes it easier for the Fed to cut interest rates,
which is something he wants them to do ahead of the midterm elections in
November.
So that's the backdrop, I think, in terms of kind of like the next sort of six
months, Trump wants lower oil prices.
And I think he can kind of pull the levers to kind of make that happen.
Beyond that, we have to kind of remind ourselves that there are potentially some
bullish straws
in the wind here.
So on the supply side, you know, In the next three or four months,
most of OPEC's spare capacity will be back on the market.
And that had been a big overhang for the oil market over the last two or three
years.
So that is one thing to consider.
The next thing to consider is US shale generally is running into slightly tougher
geology
as they've drilled up the very best stuff.
And so that is another big overhang on the oil price over the last decade or so.
So, I can kind of see a situation by the middle of this year whereby those two big
overhangs are removed.
Meanwhile, in terms of sort of when is peak oil demand, I think that is getting
pushed out.
EV penetration is not rising as quickly as people had hoped.
So what I kind of see happening is the oil price kind of sort of drifting down the
next few months,
but potentially creating a nice buying opportunity around mid-year.
That's my base case.
You know, we need to be humble and we need to recognize that, you know, all sorts of
things we don't expect can happen.
And so, you know, there are sort of geopolitical sort of skews both on the
upside and on the downside.
So if there is peace in Russia and Ukraine in the next few months,
that's a pretty bearish deal price because suddenly lots of Russian crude will become
available.
with Iran.
Yeah, so it's a geopolitical play at the moment, apart from the basic fundamentals
of supply and demand that you've quite neatly
outlined.
You've got to decide whether Russia, Ukraine is going to be peaceful anytime
soon.
You've got to do the same with Iran.
And you've got to say, well, Venezuela hasn't been concluded definitively.
But on the other hand, it's moving towards a bearish case.
So it's all to do with taking your pick really, Paul.
Yeah, look, I mean, I'm always reminded of that old saying that there are two types
of oil experts, those who don't know and those who don't know they don't know.
Which, you know, it just really reminds us that, yes, I mean,
there are all sorts of exogenous factors here that can kind of create quite big
volatility.
But base case is there's a lot of oversupply coming in the first half of
this year, and the market has to absorb that.
But yet thereafter, you know, we are potentially putting in place the
ingredients we need for a a multi-year bull cycle.
Paul, thank you very much for your expert time as always.
Paul Gooden is Head of Natural Resources at 91 speaking to us from Jackson,
Wyoming.
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