WEBVTT 1 00:00:00.380 --> 00:00:04.524 You're listening to Strictly Business Podcast with Lindsay Williams. 2 00:00:05.845 --> 00:00:08.367 The oil price is at a multi-week high, 3 00:00:08.387 --> 00:00:14.252 but still only in the same sort of range that it was the end of October of 2025. 4 00:00:14.272 --> 00:00:17.775 It's been stuck between $60 and $65 a barrel. 5 00:00:17.795 --> 00:00:19.376 That's for Brent crude oil. 6 00:00:19.636 --> 00:00:26.042 The last time I spoke to my guest today, it was around about $76, $77 a barrel. 7 00:00:26.442 --> 00:00:28.964 He's Paul Gooden, Head of Natural Resources at Strictly. 8 00:00:29.128 --> 00:00:35.732 at 91 in London, speaking to us incidentally from Jackson, Wyoming, where 9 00:00:35.732 --> 00:00:37.732 he's attending a conference. 10 00:00:37.732 --> 00:00:41.596 That's the same Jackson, Wyoming pool where they have the Jackson Hole affair 11 00:00:41.596 --> 00:00:43.596 every year, isn't it? 12 00:00:43.596 --> 00:00:43.617 You're right. 13 00:00:43.617 --> 00:00:44.398 That's where the central bankers meet. 14 00:00:44.418 --> 00:00:45.459 Yeah, exactly. 15 00:00:45.460 --> 00:00:48.621 If we won't talk about central bankers at the moment, we're going to focus on oil. 16 00:00:49.201 --> 00:00:54.644 And just when you thought it was safe to be an oil analyst again, along comes Iran. 17 00:00:54.744 --> 00:00:58.926 How big a deal is the potential continuing conflict in Iran? 18 00:00:59.807 --> 00:01:01.727 In Iran, I mean, potentially quite meaningful. 19 00:01:01.967 --> 00:01:08.090 Iran has the third biggest oil reserves globally, you know, produces north of 3 20 00:01:08.090 --> 00:01:10.090 million barrels a day. 21 00:01:10.090 --> 00:01:13.452 And look, what tends to happen is if you get kind of regime change, 22 00:01:13.773 --> 00:01:18.495 it tends to result in a lot of factionalization, a lot of infighting, 23 00:01:19.435 --> 00:01:23.637 which results for a period at in reduced oil flows. 24 00:01:23.697 --> 00:01:29.400 So I think what's going on in Iran at the moment is potentially quite bullish for 25 00:01:29.400 --> 00:01:31.400 the oil price. 26 00:01:31.400 --> 00:01:33.400 But of course, bear in mind, 27 00:01:33.400 --> 00:01:38.045 President Trump wants to keep oil prices down because the US consumer is very 28 00:01:38.725 --> 00:01:43.928 sensitive to high gasoline prices, particularly going into the midterm 29 00:01:43.928 --> 00:01:45.928 elections in November. 30 00:01:45.928 --> 00:01:46.069 So I think Trump wants to keep oil prices down. 31 00:01:46.169 --> 00:01:52.060 But certainly if they were to kind of take action in Iran or if there was to be a 32 00:01:52.060 --> 00:01:54.060 regime change, 33 00:01:54.060 --> 00:01:54.821 I think that could be tactically quite bullish for the oil price. 34 00:01:55.201 --> 00:01:58.502 Even without Trump though there is a lot going on in the country. 35 00:01:58.642 --> 00:02:05.484 There have been anti-government protests mainly apparently because of the economy 36 00:02:05.484 --> 00:02:07.484 raging inflation, the currency collapsing, etc. 37 00:02:07.484 --> 00:02:13.527 But even without Trump something might happen and we cast our minds back to 1979 38 00:02:13.527 --> 00:02:15.527 when the Shah of Iran was 39 00:02:15.527 --> 00:02:17.128 deposed and an Islamic State was instated. 40 00:02:17.428 --> 00:02:23.610 And that's going the opposite direction, because I noticed that the son of the Shah 41 00:02:23.610 --> 00:02:25.610 of Iran has been touted as maybe going back. 42 00:02:25.610 --> 00:02:27.610 A little bit fanciful in my opinion. 43 00:02:27.610 --> 00:02:31.292 But if you go back to 79, if it were as momentous as that occasion, 44 00:02:31.612 --> 00:02:34.133 then it really could be something quite meaningful for oil. 45 00:02:34.873 --> 00:02:35.573 Yeah. 46 00:02:35.573 --> 00:02:37.934 And look, you point to kind of succession and what happens next. 47 00:02:38.694 --> 00:02:45.156 And therein is the problem is in the different groups and factions will have 48 00:02:45.156 --> 00:02:47.156 different ideas about 49 00:02:47.156 --> 00:02:49.156 how they think. 50 00:02:49.156 --> 00:02:51.156 things should proceed. 51 00:02:51.156 --> 00:02:53.397 And that creates instability, that sort of generally disrupts flows of oil. 52 00:02:53.537 --> 00:02:56.600 So look, it's certainly something that we're keeping a close eye on. 53 00:02:57.320 --> 00:02:59.642 Without Iran, we've had Venezuela. 54 00:02:59.742 --> 00:03:04.526 Venezuela is an interesting one, because although it's got a lot of oil under the 55 00:03:04.526 --> 00:03:06.526 ground and under the sea, 56 00:03:06.526 --> 00:03:10.832 the fact is that that oil is sludge compared to Brent crude oil or West Texas. 57 00:03:11.612 --> 00:03:13.614 So it's not quite as simple as that. 58 00:03:13.654 --> 00:03:15.696 Maybe you could sort of encapsulate what's gone on 59 00:03:16.156 --> 00:03:21.017 in Venezuela and what might happen to the oil price because of what's happened? 60 00:03:21.938 --> 00:03:22.638 Yes. 61 00:03:22.638 --> 00:03:27.960 So, you know, Venezuela, again, you know, very large reserves of oil, you know, 62 00:03:28.020 --> 00:03:32.001 reportedly that the biggest reserves globally even more than Saudi. 63 00:03:33.461 --> 00:03:35.082 But Venezuela doesn't produce a great deal. 64 00:03:35.182 --> 00:03:37.822 It produces just below a million barrels a day. 65 00:03:38.463 --> 00:03:42.844 The peak in the 1970s was sort of about three and a half, four million barrels a 66 00:03:42.844 --> 00:03:43.285 day. 67 00:03:43.285 --> 00:03:49.662 To put that into comparison, you know, Saudi produces about 10 million barrels a 68 00:03:49.662 --> 00:03:51.662 day and the global market's about 100 69 00:03:51.662 --> 00:03:53.662 million barrels a day. 70 00:03:53.662 --> 00:03:56.524 So certainly Venezuela appears to be significantly underproducing relative to 71 00:03:56.524 --> 00:03:58.524 the size of its reserves. 72 00:03:58.524 --> 00:04:00.524 You're absolutely right. 73 00:04:00.524 --> 00:04:02.524 Not all reserves are created equal. 74 00:04:02.524 --> 00:04:03.225 A lot of the oil in Venezuela is so-called heavy oil. 75 00:04:03.646 --> 00:04:05.066 Think of it as sort of peanut butter. 76 00:04:05.846 --> 00:04:08.427 You need to put a lot of energy in to kind of get it to flow. 77 00:04:09.767 --> 00:04:14.509 And then to kind of get it to move into pipelines, you need to to put diluent into 78 00:04:14.509 --> 00:04:14.749 it. 79 00:04:14.749 --> 00:04:17.871 So, you know, not the highest quality crude. 80 00:04:18.952 --> 00:04:20.934 But what happens from here? 81 00:04:21.014 --> 00:04:25.657 Trump had all the big US oil executives in the White House on Friday. 82 00:04:26.177 --> 00:04:29.479 He's trying to corral them to invest more in the country. 83 00:04:30.580 --> 00:04:37.104 The reality is I think most of them will stay on the sidelines until there is a 84 00:04:37.104 --> 00:04:39.104 comprehensive framework on 85 00:04:39.104 --> 00:04:42.368 security and around fiscal terms and about how... 86 00:04:42.388 --> 00:04:47.372 how they're going to get access to dollars and to kind of get a return on their 87 00:04:47.372 --> 00:04:49.372 investment. 88 00:04:49.372 --> 00:04:52.095 Hopefully we'll kind of see that over the coming months in the meantime. 89 00:04:52.636 --> 00:04:59.361 I think there is quite a lot that can be done to improve production just by getting 90 00:04:59.361 --> 00:05:01.361 spare 91 00:05:01.361 --> 00:05:06.346 parts into the country and by getting more personnel in the country and by giving 92 00:05:06.346 --> 00:05:08.346 them access to diluent to 93 00:05:08.346 --> 00:05:10.346 help the crew to flow. 94 00:05:10.346 --> 00:05:14.224 So, you know, Most people are quite skeptical that Venezuela can increase 95 00:05:14.224 --> 00:05:16.224 production in the near term. 96 00:05:16.224 --> 00:05:20.048 My view is I think they can increase production by about half a million barrels 97 00:05:20.048 --> 00:05:22.048 a day on a two to three year view. 98 00:05:22.048 --> 00:05:23.270 So that's more optimistic view than I think most people, 99 00:05:24.091 --> 00:05:30.015 but thereafter to get production up more meaningfully than that, I think it'll be 100 00:05:30.015 --> 00:05:32.015 harder than people think. 101 00:05:32.015 --> 00:05:34.015 It'll take a long time. 102 00:05:34.015 --> 00:05:36.015 It'll take a lot of dollars. 103 00:05:36.015 --> 00:05:40.902 But in the grand scheme of things, what's going on Venezuela is quite bearish for 104 00:05:40.902 --> 00:05:42.902 the oil price because of course, you know, 105 00:05:42.902 --> 00:05:43.263 more oil supply means lower prices. 106 00:05:43.984 --> 00:05:50.026 And talking about bearishness, as I said in my introduction, the last time we 107 00:05:50.026 --> 00:05:52.026 spoke, the oil price was in the high 70s. Okay, 108 00:05:52.026 --> 00:05:52.488 it spiked to there and it came back down pretty quickly. 109 00:05:52.808 --> 00:05:54.068 But it's been going down. 110 00:05:54.188 --> 00:05:56.510 I'm just looking at the graph now of Brent crude. 111 00:05:56.510 --> 00:05:57.990 It's been going down ever since. 112 00:05:58.010 --> 00:06:01.491 And again, we've had a $5 spike recently because of Iran. 113 00:06:01.752 --> 00:06:04.774 But it really does look like a market that's going nowhere. 114 00:06:04.774 --> 00:06:06.274 It's either going to go sideways or down. 115 00:06:06.534 --> 00:06:08.075 Again, that's my opinion. 116 00:06:08.515 --> 00:06:09.275 I did see... 117 00:06:09.535 --> 00:06:16.300 Paul, some pretty good trade figures coming out in the last few days for I 118 00:06:16.300 --> 00:06:18.300 think the third quarter of last year. 119 00:06:18.300 --> 00:06:18.882 And it was dominated by energy products. 120 00:06:18.883 --> 00:06:25.547 So the tariff situation that emerged beginning of last year from the Trump 121 00:06:25.547 --> 00:06:27.547 administration hasn't hit global 122 00:06:27.547 --> 00:06:27.668 trade as much as people had feared. 123 00:06:27.728 --> 00:06:29.049 People have adapted. 124 00:06:29.370 --> 00:06:33.413 And that's obviously quite good for oil when it comes to economic activity. 125 00:06:34.113 --> 00:06:39.697 Yeah, look, I mean, when it comes to the oil price, there are there are sort of 126 00:06:39.697 --> 00:06:41.697 many moving parts to what's going on. 127 00:06:41.697 --> 00:06:47.504 We referred to two of the geopolitical situations going on with Venezuela and 128 00:06:47.504 --> 00:06:49.504 Iran, that the third one, of course, is Russia, 129 00:06:49.504 --> 00:06:51.504 Ukraine. 130 00:06:51.504 --> 00:06:56.471 I mean, to take a sort of step back, I would kind of sort of focus off what does 131 00:06:56.471 --> 00:06:58.471 President Trump want over the next year or so. 132 00:06:58.471 --> 00:07:01.215 And I would kind of say he has the sort of the political levers to kind of make that 133 00:07:01.215 --> 00:07:01.376 happen. 134 00:07:01.376 --> 00:07:05.539 And certainly he wants low oil prices in the first half of this year. 135 00:07:06.411 --> 00:07:09.594 because that makes it easier for the Fed to cut interest rates, 136 00:07:10.035 --> 00:07:14.558 which is something he wants them to do ahead of the midterm elections in 137 00:07:14.558 --> 00:07:14.700 November. 138 00:07:14.700 --> 00:07:19.663 So that's the backdrop, I think, in terms of kind of like the next sort of six 139 00:07:19.663 --> 00:07:21.663 months, Trump wants lower oil prices. 140 00:07:21.663 --> 00:07:23.046 And I think he can kind of pull the levers to kind of make that happen. 141 00:07:23.966 --> 00:07:30.913 Beyond that, we have to kind of remind ourselves that there are potentially some 142 00:07:30.913 --> 00:07:32.913 bullish straws 143 00:07:32.913 --> 00:07:34.913 in the wind here. 144 00:07:34.913 --> 00:07:36.692 So on the supply side, you know, In the next three or four months, 145 00:07:37.053 --> 00:07:39.774 most of OPEC's spare capacity will be back on the market. 146 00:07:41.135 --> 00:07:45.478 And that had been a big overhang for the oil market over the last two or three 147 00:07:45.478 --> 00:07:45.558 years. 148 00:07:46.077 --> 00:07:48.339 So that is one thing to consider. 149 00:07:48.478 --> 00:07:54.483 The next thing to consider is US shale generally is running into slightly tougher 150 00:07:54.483 --> 00:07:56.483 geology 151 00:07:56.483 --> 00:07:58.644 as they've drilled up the very best stuff. 152 00:07:59.325 --> 00:08:03.868 And so that is another big overhang on the oil price over the last decade or so. 153 00:08:04.587 --> 00:08:10.589 So, I can kind of see a situation by the middle of this year whereby those two big 154 00:08:10.589 --> 00:08:12.589 overhangs are removed. 155 00:08:12.589 --> 00:08:16.471 Meanwhile, in terms of sort of when is peak oil demand, I think that is getting 156 00:08:16.471 --> 00:08:18.471 pushed out. 157 00:08:18.471 --> 00:08:21.952 EV penetration is not rising as quickly as people had hoped. 158 00:08:21.972 --> 00:08:27.233 So what I kind of see happening is the oil price kind of sort of drifting down the 159 00:08:27.233 --> 00:08:29.233 next few months, 160 00:08:29.233 --> 00:08:32.816 but potentially creating a nice buying opportunity around mid-year. 161 00:08:33.635 --> 00:08:34.555 That's my base case. 162 00:08:35.077 --> 00:08:41.098 You know, we need to be humble and we need to recognize that, you know, all sorts of 163 00:08:41.098 --> 00:08:43.098 things we don't expect can happen. 164 00:08:43.098 --> 00:08:48.442 And so, you know, there are sort of geopolitical sort of skews both on the 165 00:08:48.442 --> 00:08:50.442 upside and on the downside. 166 00:08:50.442 --> 00:08:53.723 So if there is peace in Russia and Ukraine in the next few months, 167 00:08:53.803 --> 00:09:00.646 that's a pretty bearish deal price because suddenly lots of Russian crude will become 168 00:09:00.646 --> 00:09:02.646 available. 169 00:09:03.288 --> 00:09:03.988 with Iran. 170 00:09:04.109 --> 00:09:10.374 Yeah, so it's a geopolitical play at the moment, apart from the basic fundamentals 171 00:09:10.374 --> 00:09:12.374 of supply and demand that you've quite neatly 172 00:09:12.374 --> 00:09:14.374 outlined. 173 00:09:14.374 --> 00:09:15.157 You've got to decide whether Russia, Ukraine is going to be peaceful anytime 174 00:09:15.157 --> 00:09:17.157 soon. 175 00:09:17.157 --> 00:09:19.157 You've got to do the same with Iran. 176 00:09:19.157 --> 00:09:21.401 And you've got to say, well, Venezuela hasn't been concluded definitively. 177 00:09:21.543 --> 00:09:25.044 But on the other hand, it's moving towards a bearish case. 178 00:09:25.085 --> 00:09:28.288 So it's all to do with taking your pick really, Paul. 179 00:09:28.952 --> 00:09:35.898 Yeah, look, I mean, I'm always reminded of that old saying that there are two types 180 00:09:35.898 --> 00:09:37.898 of oil experts, those who don't know and those who don't know they don't know. 181 00:09:37.898 --> 00:09:41.381 Which, you know, it just really reminds us that, yes, I mean, 182 00:09:41.402 --> 00:09:45.785 there are all sorts of exogenous factors here that can kind of create quite big 183 00:09:45.785 --> 00:09:47.785 volatility. 184 00:09:47.785 --> 00:09:52.650 But base case is there's a lot of oversupply coming in the first half of 185 00:09:52.650 --> 00:09:54.650 this year, and the market has to absorb that. 186 00:09:54.650 --> 00:09:59.578 But yet thereafter, you know, we are potentially putting in place the 187 00:09:59.578 --> 00:10:01.578 ingredients we need for a a multi-year bull cycle. 188 00:10:01.578 --> 00:10:02.766 Paul, thank you very much for your expert time as always. 189 00:10:02.827 --> 00:10:07.799 Paul Gooden is Head of Natural Resources at 91 speaking to us from Jackson, 190 00:10:07.799 --> 00:10:09.799 Wyoming. 191 00:10:09.799 --> 00:10:16.395 The views and opinions expressed in these podcasts are those of Lindsay Williams and 192 00:10:16.395 --> 00:10:18.395 various contributors and do not reflect the policy, 193 00:10:18.395 --> 00:10:20.136 position or opinion of any other agency, organization, 194 00:10:20.476 --> 00:10:25.097 employer or company associated with StrictlyBusinessPodcast.com. 195 00:10:25.577 --> 00:10:32.019 Assumptions made on the analyses are not reflective of the position of any other 196 00:10:32.019 --> 00:10:34.019 entity other than the speaker or 197 00:10:34.019 --> 00:10:38.321 the author. 198 00:10:39.061 --> 00:10:40.864 and rethinking at any time. 199 00:10:41.165 --> 00:10:43.569 Please do not hold us to them in perpetuity.