WEBVTT

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The value of investments can fall as well
as rise and losses may be made.

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This is not a buy, sell or hold
recommendation for any particular

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security.

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The oil prices jump from the commodity
pages to the business pages to the front

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pages.

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It's been an astonishing March the 9th so
far.

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And I don't know, will it get less
astonishing?

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With me now is Paul Gooden, Head of
Natural Resources at 91 in London.

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Paul, I know you're really, really busy,
so thanks for speaking to me.

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but For some reason I was up at half past
four London time this morning.

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I looked at my screen and the oil price
was up 25% at around about $117 a barrel.

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I looked at the high of the morning, it
was $119.46.

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That was for Brent crude oil.

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And I'm looking at it now and I'm saying
to myself, oh goodness me, it's only up

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13% now.

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But as I said, it has been astonishing,
hasn't it?

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Yeah.

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It has been astonishing.

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And look, I guess at times like this,

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it's good to be calm and rational and just
to kind of walk you through the moving

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parts here.

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So nine days ago, the US and Israel
started bombing Iran.

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Iran responded by saying it would close
the streets of Hormuz and it also launched

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some missiles and drones at the energy
infrastructure

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of neighbors in the area like Qatar and
Saudi.

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Now, while Iran hasn't physically blocked
the streets,

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they are effectively closed because the
insurance industry won't insure any

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vessels passing through the straits.

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And that's a big problem for energy
markets, because normally

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20 million barrels a day of oil flows
through the Straits of Hormuz.

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And to put that into perspective, the
global market is about 100 million barrels

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a day.

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So that's a 20 percent outage.

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Now, there's been a little bit of
rejigging of supply chains.

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So, you know, Saudi is getting a bit
incremental.

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oil out of the Red Sea.

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But still, I think you've got about 17
million barrel a day outed, which is big.

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And that means we're running down oil
inventories.

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And when that happens, the oil price goes
up.

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Okay, that's a good summary.

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I'm looking at my screen now.

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And we've mentioned oil, it's still up
13%.

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And obviously, that 119 that I spoke about
and 25 to 30% gains was all a bit spiky.

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And it's sort of smacked of panic.

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But nonetheless, these prices is

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are impactful but it's not just oil i mean
i look at heating oil for example uh 11.4

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percent up and i've got

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natural gas up six percent but i don't
know if that's a different type of natural

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gas to european natural gas which is
heavily impacted

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by the gas equivalent of the straits of
hormuz and that is the qatar pipeline um

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yes so look you're right there are a
couple of nuances so we've talked about

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the oil price.

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But of course, we as consumers, we don't
consume oil, we consume the products that

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are made from oil.

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And when you look at some of those
products, be it, you know, jet fuel or

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diesel or gasoline, or you mentioned
heating oil,

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some of them are being impacted a little
bit more.

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So probably, you know, the standout is the
European jet fuel price,

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which is basically more than doubled year
to date.

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So yes, some of the refined products are
getting a little bit squeezy.

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And then natural gas, you're right, I
mean, that is also being impacted.

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So, I mean, what's interesting about
natural gas is that it's really the LNG

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market that's impacted.

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So that's the liquefied natural gas.

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So that's sort of gas that is sort of
super chilled and kind of sent around the

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world.

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About 20% of that flows through the
Straits of Hormuz.

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That's about 20% of the global LNG market.

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And that's effectively been shut in as
well.

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Now in Europe, we don't really consume any
of that gas.

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I mean, that is mainly Qatari gas that is
sent to Asia.

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However, we are indirectly impacted
because those Asian buyers that can't get

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their LNG are

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kind of bidding up the spot price of
natural gas.

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And so you're absolutely right.

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If you look at the European spot gas
price, it's basically doubled year to

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date.

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So yes, this is a broad problem for energy
markets, both oil and gas.

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And from here, the range of outcomes is
wide in that although the rhetoric is

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getting ramped up

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on both sides, if there was to be
de-escalation in the next few weeks, you

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would expect the oil price to come down.

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I don't think we'll go back to the 60 to
70 we were at earlier this year.

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I think some geopolitical premium would
remain.

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But equally, it's about duration now.

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And so if the streets of Hormuz stay
closed for a long time, then you...

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we're going to see the oil price move
higher.

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And ultimately, you know,

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the worst case is the oil price moves to a
level at which you get demand destruction.

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And that basically means that consumers
change their behavior a little bit so that

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they consume less oil.

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You mentioned heating oil, for example.

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You might decide to burn wood instead of
using heating oil.

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You might decide to catch the bus or the
train rather than driving.

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You might, you know, take a short-haul
flight rather than a long-haul flight.

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And that kind of behavior change probably
happens, you know, somewhere like $120.

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So, you know, is it possible you could
temporarily see a spike through that $120

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to $150?

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It's possible.

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I don't think we could stay there.

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But yes, a wide range of outcomes.

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What about what's been made of stockpiles?

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Some people are saying that, for example,
China was about 10 days ago.

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They said China's got 100 days worth of
oil, less other countries, other regions

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have less than that.

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How important a factor is that, Paul, to
the price?

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And I'm just looking at the price now.

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And West Texas has dipped below $100 a
barrel.

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So it's all over the place.

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But is the stockpile factor also
significant?

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Yes.

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So look, inventories are very important.

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And generally speaking, there's quite a
good correlation between the oil price and

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inventory levels.

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So, you know, globally, we've got about

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8 billion barrels of oil and refined
products globally.

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And that is split between kind of oil in
transit,

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commercial storage and also government
strategic reserves.

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So that 8 billion barrels is about 80 days
of supply.

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So, you know...

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a reasonable amount.

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However, it's not spread equally.

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You mentioned China.

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China's a big oil importer.

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They've been building in which was
aggressively over the last year or so.

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There's news this morning that the G7
might be considering a coordinated release

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from strategic reserves.

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But yes, look, more broadly, your point is
exactly right.

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Inventories are crucial to how this will
play out.

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How do you see it playing out?

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You're not a geopolitical analyst, you
just get fed what we're all fed, I think,

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except probably a little bit more
sophisticated than my news flow, for

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example.

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But I think what you see on the news of
black smoke billowing from oil depots in

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Tehran, it sort of fuels the punting side
of the oil market.

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But the real side of the oil market, or
supply and demand, ultimately levels out,

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doesn't it?

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But as you quite rightly said earlier on
with a little bit of a geopolitical

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premium built in.

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But is it your contention we're not going
to come back to the 60-70 that we've been

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used to for much of

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2025?

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Yeah, look, I mean, in terms of the short
term, you know, over the weekend, the

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rhetoric elevated.

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You had Trump saying that a spike in the
short-term oil price is a price worth

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paying.

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You mentioned you've had Israel bomb some
oil storage depots in Iran.

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So the rhetoric is...

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is difficult.

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How quickly this resolves itself, I don't
know.

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You know, you're probably talking weeks.

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I think if it goes into months, then yes,
certainly the oil price is going to be

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heading higher.

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I mean, one thing to bear in mind is that
in November, you've got the US midterm

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elections.

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And just as turkeys don't vote for
Christmas,

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so US presidents don't like going into big
elections with a high domestic gasoline

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price because the US consumer is...

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You know, very sensitive to gasoline
prices.

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They're more volatile in the US because
there's less indirect taxation in the

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gasoline price and they drive

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a lot more than we do in Europe.

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So, look, I think this will be certainly
much calmer in the second half of the year

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running

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into those elections.

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For the next month or so, it's very
difficult to know.

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But what I do think is that post this.

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I think a geopolitical premium will remain
in the oil price.

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We were kind of 60 to 70 to the end of
last year, first few months of this year.

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I think big oil importers will be nervous
and they'll want to build up their

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inventories,

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which will help the oil price.

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And taking a step back on a more
fundamental view,

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I kind of think that on a sort of a two to
three year view.

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The big overhangs for the oil price are
being removed and those big overhangs are

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firstly US shale which is running into

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tougher geology it isn't growing so
quickly.

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It's secondly OPEC spare capacity which
has been quite high the last few years but

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you know by the middle of this year it's
back to

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a normal level.

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And then thirdly and perhaps the biggest
one is long-term demand forecasts in that

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I think people are thinking that oil
demand can continue to grow kind of into

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the

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2030s. The IEA recently put out a report
saying Thank you.

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that under current government policies all
demand will grow to the sort of about

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2050.

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So the question I'm asking myself is does
what we're seeing in Iran kind of bridge

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us through

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what should have been an oversupplied
market this year?

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into a more kind of bullish market, sort
of 27, 28, 29 onwards.

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Just a quick one to end, if you would,
Paul.

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What does this all mean for positioning at
91 when it comes to natural resources and

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particularly the energy sector?

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Yeah, so look, within the Global Natural
Resources Fund, on which I'm a co-PM,

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energy was quite a big underweight for us
last year.

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And in the early part of this year, we
started closing that underweight.

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And as of the moment, we are kind of...

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slightly overweight energy.

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Paul, thanks so much for your time.

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That's Paul Gooden, Head of Natural
Resources at 91 in London.

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This podcast is a marketing communication
and is provided for general information

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only and assumes a certain level of
knowledge of

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financial markets.

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It is not an invitation to make an
investment and should not be construed as

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advice.

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The views of this podcast are those of
contributors at the time of publication

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and do not necessarily reflect those of
91.

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In South Africa, 91 is an Authorised
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