Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Traffic through these straightiformos remaining at a standstill following the
Speaker 2: US seizure of an Iranan cargo ship, the escalation casting
Speaker 2: doubt on whether the two nations will meet for peace
Speaker 2: talks tomorrow. Elsewhere, the President renewing attacks threats to attacks
Speaker 2: civilian infrastructure in Iran in a three social post, the
Speaker 2: President vowing to quote knock out every single power plant
Speaker 2: and every single bridge if Tehran does not accept the
Speaker 2: US deal. And finally, US Energy Secretary Chris Rights saying
Speaker 2: gas prices may not dip below three dollars until next year.
Speaker 3: I don't know that could happen later this year. That
Speaker 3: might not happen till next year. But prices have likely
Speaker 3: peaked and they'll start going down. Certainly, with a resolution
Speaker 3: of this conflict, you'll see prices go down. Prices across
Speaker 3: the board, on energy, prices will go down.
Speaker 2: The national average for a gallon of gasoline remaining above
Speaker 2: four bucks, the highest price since August twenty two.
Speaker 4: Yeah, and people pointed the fact that Treasure Secretary Scott
Speaker 4: Besen had said previously that the price of gasoline was
Speaker 4: likely to go down to that three percent level or
Speaker 4: even below by the summer. This is a political issue,
Speaker 4: and this is an issue of a calendar going into
Speaker 4: the midterm elections, and how much can this administration really
Speaker 4: fortify some of the some of the support that they've
Speaker 4: seen in polls recently based in the ceasefire? Can they
Speaker 4: get oil prices down to three percent? We ask every
Speaker 4: single commodity strategist who comes on, and they just either
Speaker 4: say no comment or they just say no. And that
Speaker 4: ultimately is what a lot of people, at least in Marcus,
Speaker 4: seem to believe.
Speaker 5: Three dollars a gallon is going to be really tough
Speaker 5: for this administration. It's not just what's going on in
Speaker 5: the Middle East and the strait of her moves, but
Speaker 5: also it's peak driving season, where naturally and normally, with
Speaker 5: the cyclical cycle of energy prices, you do see prices
Speaker 5: rise in the summer. So this is going to be
Speaker 5: a really hard time that they're trying to go to
Speaker 5: before the midterm elections. And once again I mentioned this
Speaker 5: poll over the weekend, two thirds of Americans are saying
Speaker 5: gasoline prices themselves are putting a lot of pressure on
Speaker 5: them families Right now.
Speaker 2: It is certainly a problem for confidence creagizing once again
Speaker 2: this morning, following a weekend of tension in the Middle
Speaker 2: East culminating with the US ceasing and around it ship
Speaker 2: Francisco Blanche Bank for America writing the paper oil market
Speaker 2: is priced to perfection that ignores post conflict energy economy realities.
Speaker 2: Francisco joins us now for more. Francisco, thanks for making
Speaker 2: time for us this morning. That line at the end,
Speaker 2: the post conflict energy economic realities, What are they that
Speaker 2: you don't think we quite appreciate?
Speaker 6: Hey, John, agreed to see you again.
Speaker 1: Look, I think there is number one potentially a per
Speaker 1: amount of refinery damage. Remember, about a third of the
Speaker 1: traffic in oil market through hormuz is roughly a petroleum product.
Speaker 1: So we're going to have a hard time restoring petroleum
Speaker 1: product flows, which means I mean you were talking about
Speaker 1: gasoline Eardier, and I do think that. I mean, gasoline
Speaker 1: is probably the least important product out of those being
Speaker 1: exported through hormones. Only five percent end of seaborne gasoline
Speaker 1: globally flows through hormones. But there is other problems like
Speaker 1: jet fuel or diesel NAPP that are are much more
Speaker 1: reliant on that straight for supplies. Number two, there's also
Speaker 1: oil fields. There's many old oil fields in the Middle
Speaker 1: East that have had to be shut down in order
Speaker 1: to essentially contain the storage overflow, and that could be
Speaker 1: also a problem as we restart those. There's potentially pipeline damage.
Speaker 6: And then of course there is there is just.
Speaker 1: A notting the web of vessels which are tied up
Speaker 1: on both sides of the strait and need to be
Speaker 1: essentially reshuffled in a very meaningful way to restore flows.
Speaker 1: So I do think those are probably the biggest constraints
Speaker 1: on the oil side, and then on gas there is
Speaker 1: there's a few others, as we know because we strike
Speaker 1: the r strike.
Speaker 6: In rasta Ura Russell about about three weeks.
Speaker 2: Ago, Francisco, Can we just set on one product then,
Speaker 2: jet field, and can we talk about cushions that are
Speaker 2: available to some regions. How big is the cushion of
Speaker 2: available jet field in a place like Europe. I imagine
Speaker 2: it differs across from one country and one nation to
Speaker 2: the next, But in your opinion for the region as
Speaker 2: a whole right now, how big is the cushion that they've.
Speaker 6: Gone Well, we heard it from from fatib role.
Speaker 1: Last week it was six weeks, so I guess now
Speaker 1: it's five weeks, which is why time is of the
Speaker 1: essence to restore flows and to restore refinery operations across
Speaker 1: the entire Middle East, which frankly.
Speaker 6: I mean counts on two countries. Iran and Saudi Arabia have.
Speaker 1: Two of the of the largest global refining toolkits, so
Speaker 1: we need to see all those flows being restored. But yeah,
Speaker 1: I would say Europe probably are five weeks at this point,
Speaker 1: and John, we are already seeing cancellations of flights. It's
Speaker 1: relatively small at the moment, but it's going to start
Speaker 1: growing into the summer because one of the challenges here
Speaker 1: is that we are going to to peak demand season
Speaker 1: in the next five or six weeks, and once we
Speaker 1: get into June, it's going to be complicated. So it's
Speaker 1: not just about looking in your fair looking in your flight.
Speaker 6: Is that that flight just might be canceled?
Speaker 4: Francisco, is this just a European issue? Or when you
Speaker 4: have certain regions that no longer have availability of jet fuel,
Speaker 4: does that torpedo a lot of international travel travel more.
Speaker 1: Broadly, Well, it does, because remember the only product globally
Speaker 1: that has the same specifications across the oil complex is
Speaker 1: actually JEFF Fuel for the obvious reasons that the buyings
Speaker 1: and air bulses that fly around the world have to
Speaker 1: be filled with the exact same specification.
Speaker 6: So there is that there is that challenge.
Speaker 1: You might be able to fly out of North America
Speaker 1: which is sitting long product generally on long creol oil.
Speaker 6: But can you get back I don't know.
Speaker 1: And I think the other issue that's important to think
Speaker 1: about here in when it comes to when it comes
Speaker 1: to the petroleum product complexes that perhaps you were talking
Speaker 1: all about gasoline. The gasoline there's some flexibility there. We
Speaker 1: could see more but tain blending into summer gasoline, which
Speaker 1: would shave off some of the prices. You could see
Speaker 1: the relaxation of other fuel specifications into the summer. And
Speaker 1: then also again gasoline it's a lot harder to make
Speaker 1: under summer spec but then winter spec is generally easier
Speaker 1: to meet and demand tends to be lower. So I
Speaker 1: am perhaps a little more bearish on gasoline retive to
Speaker 1: older products once we pass the summer. I do think
Speaker 1: it's easier to get gasoline lower retive to older petroleum
Speaker 1: products Francisco.
Speaker 4: A lot of people have commented that they take some
Speaker 4: comfort in the back end of the curve for oil prices.
Speaker 6: You do have this.
Speaker 4: Unprecedented backwardation that the front end, that current price is
Speaker 4: incredibly high, and you see at the long end, or
Speaker 4: just in December, you see about eighty dollars a barrel.
Speaker 4: When you look at Brent crude, you think it's the opposite.
Speaker 4: You think that's a warning sign.
Speaker 1: Why, well, we do think that the well, the conflict,
Speaker 1: first of all, is still far from still far from
Speaker 1: over us. We've seen over the weekend only about twenty
Speaker 1: vessels passed through on Saturday. And you know, frankly, we
Speaker 1: need to see what the final negotiations yield. We know
Speaker 1: it took about it took about twenty months.
Speaker 6: To negotiate the jcpo A.
Speaker 1: This this negotiations can be complex and I realized that
Speaker 1: all parties want.
Speaker 6: To get to a quick resolution here.
Speaker 1: But this this takes time, and we need to see
Speaker 1: the flows occurring in the meantime. If they're not the
Speaker 1: flows are not moving, that that's a big problem for
Speaker 1: the market. But also importantly, we do think that, as
Speaker 1: a pointed out earlier, there's a lot of potential facilities
Speaker 1: that may not be able to come back in full force.
Speaker 1: Even if we get back to eighty eighty five percent
Speaker 1: in the next two three months, we're still going to
Speaker 1: another six plus months to get to the last ten
Speaker 1: to fifteen percent of oil.
Speaker 6: Flowing through or moose.
Speaker 1: That's two to three million barrels a day that the
Speaker 1: market will be short into the end of the year. So,
Speaker 1: you know, while we are you know, we're hoping that
Speaker 1: there's a resolution soon, we will still likely miss a
Speaker 1: fair amount of energy for the foreseeable future in global
Speaker 1: oil markets, and that will keep prices high into the
Speaker 1: year end.
Speaker 7: In our Francisco this week we saw our last week,
Speaker 7: we saw the US Treasury Department basically flip flop. On Onnesday,
Speaker 7: the Treasury Secretary said he will not renew the general
Speaker 7: license on Russian crude, and then Friday, very late at night,
Speaker 7: they decided to extend that waiver. How much is that
Speaker 7: cushion in the market right now.
Speaker 1: Well, there's definitely a little bit of cushion. I mean,
Speaker 1: the Russian crude and product markets are pretty large. Russia
Speaker 1: is the world's, depending on the day, second or third
Speaker 1: largest crude oil user, and the second largest.
Speaker 6: Petroleum product exporter, so that is a fair amount of cushion.
Speaker 1: But then again, remember there's been reports of strikes in
Speaker 1: different Russian ports, both in the Baltic as well as
Speaker 1: more importantly in the in the in the Black Sea,
Speaker 1: we've seen impacts on on top C and novor.
Speaker 6: Sisk and so.
Speaker 1: It's it's not easy for Russia to export oil either
Speaker 1: because obviously we've seen news of Ukraine trying to attack
Speaker 1: those facilities. So, I mean, energy assets are just generally
Speaker 1: generally have become UH targets in military conflict and and
Speaker 1: and that's one of the most difficult parts about forecasting
Speaker 1: we're supplying the demand are going to be particularly supply
Speaker 1: given that has become very much right from center of
Speaker 1: of both policy actions to your point on the US
Speaker 1: Rusure decision, but also military action, and and so I
Speaker 1: do think it's it's I mean, Russian flows are very
Speaker 1: important to keep the market in retive order, and that's
Speaker 1: why I think that decision was made at the end
Speaker 1: of last week.
Speaker 2: Francisco enjoyed the night. Thanks for coming absent time for
Speaker 2: us this morning. I appreciate it, Sir Francisco Blanche of
Speaker 2: Bank of America,