1 00:00:00,560 --> 00:00:03,560 Speaker 1: This is Tom Rowland's Reese, and you're listening to Switched 2 00:00:03,560 --> 00:00:07,440 Speaker 1: on the podcast brought to you by Bloomberg NEF Commodity 3 00:00:07,480 --> 00:00:10,400 Speaker 1: markets have had a turbulent year, with wars, sanctions, and 4 00:00:10,480 --> 00:00:14,680 Speaker 1: political shifts rewiring global trade flows. As twenty twenty six 5 00:00:14,720 --> 00:00:18,960 Speaker 1: gets underway, Bloomberg ENIFS Commodities, Energy and Environmental Markets teams 6 00:00:19,040 --> 00:00:21,400 Speaker 1: are looking ahead to a series of pressure points, from 7 00:00:21,440 --> 00:00:24,400 Speaker 1: a looming glutt in LNG and slowing US oil growth 8 00:00:24,440 --> 00:00:28,560 Speaker 1: to China's rapid expansion in renewable fuels and petrochemicals reshaping 9 00:00:28,600 --> 00:00:31,640 Speaker 1: global supply chains. Layered on top of that are rising 10 00:00:31,680 --> 00:00:34,760 Speaker 1: carbon prices, shifting weather patterns, and a surge in power 11 00:00:34,760 --> 00:00:37,199 Speaker 1: demand from data centers, all of which are adding new 12 00:00:37,200 --> 00:00:41,120 Speaker 1: complexity and volatility to already type markets. With so many 13 00:00:41,159 --> 00:00:44,400 Speaker 1: forces pulling in different directions, which trends are likely to 14 00:00:44,520 --> 00:00:47,559 Speaker 1: find commodity markets in the year ahead. To discuss this 15 00:00:47,800 --> 00:00:50,919 Speaker 1: and more today, I'm joined by David Doherty, bienif's head 16 00:00:50,920 --> 00:00:55,200 Speaker 1: of Natural Resources Research, and Enrique Gonzalez, head of US Gas, 17 00:00:55,200 --> 00:00:58,680 Speaker 1: to review findings from the note Commodities in twenty twenty six. 18 00:00:58,920 --> 00:01:01,600 Speaker 1: Ten numbers to watch for power to oil, b and 19 00:01:01,640 --> 00:01:04,480 Speaker 1: EF clients can find this note, along with other commodities 20 00:01:04,560 --> 00:01:07,440 Speaker 1: research by heading to BNIF go on the Bloomberg terminal 21 00:01:07,600 --> 00:01:10,280 Speaker 1: or BNEF dot com. If you'd like to learn more 22 00:01:10,319 --> 00:01:13,680 Speaker 1: about how bn EF approaches strategy research on the energy transition, 23 00:01:13,880 --> 00:01:17,679 Speaker 1: including developments in commodity markets, trends across different sectors, and 24 00:01:17,720 --> 00:01:20,800 Speaker 1: the cross cutting technology shaping the future, you can find 25 00:01:20,800 --> 00:01:23,560 Speaker 1: more information on BNF dot com, and if you'd like 26 00:01:23,560 --> 00:01:25,279 Speaker 1: to speak with a member of our team about becoming 27 00:01:25,319 --> 00:01:28,919 Speaker 1: a client, email us at sales dot BNF at Bloomberg 28 00:01:29,040 --> 00:01:32,200 Speaker 1: dot net. With that, let's dive into the key numbers 29 00:01:32,240 --> 00:01:44,360 Speaker 1: and themes to watch this year. David, welcome to the podcast. 30 00:01:44,680 --> 00:01:45,759 Speaker 2: Thanks Tom for having me. 31 00:01:45,840 --> 00:01:47,720 Speaker 1: And Enrique welcome to the podcast. 32 00:01:48,000 --> 00:01:49,880 Speaker 3: Yeah, thanks for having me as well. Done. 33 00:01:50,000 --> 00:01:53,160 Speaker 1: So today's conversation is, in a way, it's like a 34 00:01:53,160 --> 00:01:55,720 Speaker 1: little bit of a pick and mix, because we've produced 35 00:01:55,720 --> 00:01:59,840 Speaker 1: this report that Commodities in twenty twenty six that just 36 00:02:00,040 --> 00:02:03,640 Speaker 1: pick out work from across different teams that focus on 37 00:02:03,680 --> 00:02:06,680 Speaker 1: commodities markets for some numbers that we think are gonna 38 00:02:07,120 --> 00:02:10,760 Speaker 1: maybe define twenty twenty six. So I suppose before we 39 00:02:10,880 --> 00:02:13,240 Speaker 1: kind of get into the weeds. I mean, how is 40 00:02:13,280 --> 00:02:15,640 Speaker 1: the process of trying to figure out, you know, which 41 00:02:15,680 --> 00:02:19,919 Speaker 1: of the key numbers? Was it difficult choosing your selection 42 00:02:20,400 --> 00:02:22,000 Speaker 1: curating it for our. 43 00:02:21,840 --> 00:02:25,440 Speaker 2: Readers, And that's a really interesting question. I think. Actually, 44 00:02:25,639 --> 00:02:27,600 Speaker 2: the more that I looked at it, I realized that 45 00:02:27,680 --> 00:02:30,120 Speaker 2: twenty twenty six has quite a bunch of tipping points 46 00:02:30,160 --> 00:02:32,880 Speaker 2: or pivot points. So whether it's like slow down in 47 00:02:32,960 --> 00:02:37,000 Speaker 2: American oil production, a tipping point in the copper balance, 48 00:02:37,480 --> 00:02:41,679 Speaker 2: LNG prices needing to incentivize export, for example, there's a 49 00:02:41,760 --> 00:02:43,919 Speaker 2: lot of really individual points that I was like, oh, 50 00:02:44,040 --> 00:02:46,519 Speaker 2: that's actually kind of interesting. Let's let's highlight that one. 51 00:02:46,639 --> 00:02:48,480 Speaker 2: And the more we went through, I found probably like 52 00:02:48,520 --> 00:02:51,080 Speaker 2: maybe seven of the ten or like crucial years. So 53 00:02:51,120 --> 00:02:52,720 Speaker 2: I thought, okay, this is going to be a good one. 54 00:02:52,880 --> 00:02:54,400 Speaker 1: This is kind of interesting. I mean, actually I was 55 00:02:54,480 --> 00:02:56,640 Speaker 1: just you know, looking through the notes before, and I 56 00:02:56,680 --> 00:02:58,919 Speaker 1: was I was thinking something similar. Is that a lot 57 00:02:58,960 --> 00:03:01,600 Speaker 1: of the kind of things we've spoken about more generally 58 00:03:01,760 --> 00:03:05,200 Speaker 1: be anyf about crucial transitions. They seem to be you know, 59 00:03:05,240 --> 00:03:06,760 Speaker 1: at the point where the rubber is hitting the rope. 60 00:03:06,840 --> 00:03:08,480 Speaker 1: But it does seem like a bit of a theme, 61 00:03:08,480 --> 00:03:10,799 Speaker 1: and so maybe we can identify them as we talk 62 00:03:10,840 --> 00:03:14,040 Speaker 1: about them. Let's start off with when we're talking about commodities, 63 00:03:14,080 --> 00:03:16,280 Speaker 1: the kind of I always say that, sort of if 64 00:03:16,320 --> 00:03:19,560 Speaker 1: commodities was like high school, then the jocks that everyone 65 00:03:19,639 --> 00:03:23,400 Speaker 1: is looking at aspirationally this was a teen movie. It's oil. 66 00:03:23,840 --> 00:03:27,799 Speaker 1: You know, they're cool and good looking, maybe disliked by 67 00:03:27,800 --> 00:03:30,119 Speaker 1: everyone else, but sort of with a certain amount of jealousy. 68 00:03:30,360 --> 00:03:32,840 Speaker 1: And if that's that's how you'd characterize it. But we'll 69 00:03:32,880 --> 00:03:35,840 Speaker 1: start with the cool kids. What's going on in oil 70 00:03:36,160 --> 00:03:38,760 Speaker 1: and in particular, you know the global picture. Every year 71 00:03:38,800 --> 00:03:41,280 Speaker 1: we talk about whether there's a deficit or a surplus. 72 00:03:41,520 --> 00:03:43,040 Speaker 1: What is twenty twenty six looking like? 73 00:03:43,360 --> 00:03:45,720 Speaker 2: Yeah, first two? Thanks as a math lead in school. 74 00:03:45,720 --> 00:03:48,280 Speaker 2: I'm going to take this and run with it. Twenty 75 00:03:48,320 --> 00:03:51,360 Speaker 2: twenty six in the oil market, it's almost like for 76 00:03:51,440 --> 00:03:53,480 Speaker 2: four or five months, the oil market has been waiting 77 00:03:53,520 --> 00:03:56,360 Speaker 2: for this massive surplus of oil to happen, and then 78 00:03:56,400 --> 00:03:59,960 Speaker 2: we think it's possibly happening now, but there's no real clue. 79 00:04:00,240 --> 00:04:02,680 Speaker 2: Number is coming out to show us that it's well 80 00:04:02,680 --> 00:04:05,160 Speaker 2: over supplied. And you can ask a bunch of different agencies, 81 00:04:05,200 --> 00:04:08,440 Speaker 2: from BENAF to the International Energy Agency. You can have 82 00:04:08,520 --> 00:04:11,080 Speaker 2: between two and three and four million barrels per day 83 00:04:11,120 --> 00:04:14,360 Speaker 2: of an oversupply. But the oil price still is pretty comfortable. 84 00:04:14,360 --> 00:04:16,920 Speaker 2: The Brent oil price around sixty dollars per barrel, So 85 00:04:16,920 --> 00:04:20,039 Speaker 2: it's not really turning into a fundamental shift and the 86 00:04:20,040 --> 00:04:22,799 Speaker 2: oil price just yet. And everybody's looking at us saying 87 00:04:23,040 --> 00:04:25,280 Speaker 2: when will this happen? What's about to happen? And then 88 00:04:25,279 --> 00:04:27,159 Speaker 2: your big producers are looking at this saying like this 89 00:04:27,320 --> 00:04:29,480 Speaker 2: is going to dictate what I do in my investment 90 00:04:29,480 --> 00:04:31,560 Speaker 2: strategy because it's going down. I'm not going to throw 91 00:04:31,560 --> 00:04:32,800 Speaker 2: a bunch of cash into it right now. 92 00:04:32,880 --> 00:04:35,839 Speaker 1: Right, So why is it that there seems to be 93 00:04:35,880 --> 00:04:38,839 Speaker 1: this consensus that there's this big wave of surplus on 94 00:04:38,880 --> 00:04:41,039 Speaker 1: the way, you know, we haven't yet seen. 95 00:04:41,480 --> 00:04:45,719 Speaker 2: Yeah, we've had a big unwind from OPEC organization petroleum 96 00:04:45,760 --> 00:04:49,359 Speaker 2: exporting countries, right that organize about a third of the 97 00:04:49,360 --> 00:04:53,039 Speaker 2: world's oil production in a way to go for any 98 00:04:53,080 --> 00:04:57,680 Speaker 2: spikes and prices and manage an inventory to avoid any crisis. Right, 99 00:04:57,720 --> 00:05:00,240 Speaker 2: So any crunch and supply, they take oil off the 100 00:05:00,279 --> 00:05:02,880 Speaker 2: market when there's weak demand like during COVID right. So 101 00:05:02,920 --> 00:05:06,200 Speaker 2: OPEK over the past six months have basically stepped back 102 00:05:06,200 --> 00:05:09,320 Speaker 2: from that role. Having cut a bunch of production over 103 00:05:09,320 --> 00:05:11,440 Speaker 2: the past two to three years, they took a bunch 104 00:05:11,480 --> 00:05:13,240 Speaker 2: of oil out of the market. They lost a lot 105 00:05:13,279 --> 00:05:15,960 Speaker 2: of market share to the likes of Guyana, Brazil, and 106 00:05:16,000 --> 00:05:18,760 Speaker 2: the United States, and they're saying, we've lost enough market shares, 107 00:05:18,800 --> 00:05:20,680 Speaker 2: so we're bringing it back. So they turned on the 108 00:05:20,720 --> 00:05:23,680 Speaker 2: taps and from September onwards we saw a ton of 109 00:05:23,720 --> 00:05:26,039 Speaker 2: oil come back into the market. That's the main driver 110 00:05:26,360 --> 00:05:29,159 Speaker 2: in this big surplus. But there's also new new places 111 00:05:29,160 --> 00:05:31,719 Speaker 2: that never produced oil before. Guyana is now almost a 112 00:05:31,760 --> 00:05:35,320 Speaker 2: million boos per day producer from almost zero in twenty fifteen. 113 00:05:35,560 --> 00:05:38,600 Speaker 2: Brazil has boomed. You've got a lot of new markets 114 00:05:38,600 --> 00:05:40,920 Speaker 2: that never really produced before who are gone to market. 115 00:05:41,040 --> 00:05:43,359 Speaker 2: They have taken overshare from the likes of Saudi Arabia 116 00:05:43,440 --> 00:05:45,279 Speaker 2: the UAE, for example. So that's interesting. 117 00:05:45,279 --> 00:05:48,040 Speaker 1: I mean, I remember that being like a similar situation 118 00:05:48,480 --> 00:05:51,200 Speaker 1: in twenty twenty, and obviously the pandemic played a role there, 119 00:05:51,200 --> 00:05:54,039 Speaker 1: But from what I understood at the time, OPEK did 120 00:05:54,080 --> 00:05:56,760 Speaker 1: also increased supply, and now I know that they had 121 00:05:56,760 --> 00:05:58,920 Speaker 1: done that at some point in the twenty tens as well. 122 00:05:59,000 --> 00:06:02,200 Speaker 1: So this seems like a cycle and the narratives at 123 00:06:02,200 --> 00:06:03,960 Speaker 1: the time I remember in twenty twenty was some of 124 00:06:04,000 --> 00:06:07,520 Speaker 1: this is about pushing back on particularly the US producers, 125 00:06:07,560 --> 00:06:09,680 Speaker 1: you know, putting them back in their places. Now we 126 00:06:09,720 --> 00:06:11,919 Speaker 1: have it's not just the US, we have places like Guyana. 127 00:06:12,120 --> 00:06:15,000 Speaker 1: If this is a cycle, it's the cycle becoming tougher 128 00:06:15,040 --> 00:06:16,200 Speaker 1: and tougher for OPEK. 129 00:06:16,680 --> 00:06:18,920 Speaker 2: Yeah, I think is the answer. So traditionally they have 130 00:06:19,000 --> 00:06:22,719 Speaker 2: played this balancing player role right to keep things stable. 131 00:06:22,839 --> 00:06:25,080 Speaker 2: They have had moments in the past, but they've done 132 00:06:25,080 --> 00:06:27,200 Speaker 2: exactly what you just said and thrown a lot of 133 00:06:27,240 --> 00:06:30,679 Speaker 2: oil out into the market and tried to squeeze players out, 134 00:06:30,720 --> 00:06:34,760 Speaker 2: like US shale producers who from twenty fifteen on let 135 00:06:34,800 --> 00:06:36,960 Speaker 2: a boost in production that ate away at their profits, 136 00:06:37,000 --> 00:06:40,440 Speaker 2: right opex profits. So there's been a real interesting change 137 00:06:40,440 --> 00:06:43,160 Speaker 2: in how they posture themselves. They went from a kind 138 00:06:43,200 --> 00:06:45,440 Speaker 2: of a boring period and like the nineties and naughties, 139 00:06:45,560 --> 00:06:48,479 Speaker 2: to a more aggressive stance maybe in the past couple 140 00:06:48,480 --> 00:06:51,440 Speaker 2: of years as they've faced more threat from new suppliers 141 00:06:51,440 --> 00:06:52,839 Speaker 2: which didn't exist beforehand. 142 00:06:53,120 --> 00:06:55,080 Speaker 1: So I mean, going back to this thing you said 143 00:06:55,120 --> 00:06:57,960 Speaker 1: at the start of the podcast about around tipping points, 144 00:06:58,440 --> 00:07:01,120 Speaker 1: is the tipping point that you know, we're expecting all 145 00:07:01,160 --> 00:07:04,240 Speaker 1: the surplus to come onto the market in twenty twenty six, 146 00:07:04,320 --> 00:07:07,000 Speaker 1: and so at some point that tipping point will hit. 147 00:07:07,200 --> 00:07:12,160 Speaker 1: Or is the tipping point that this periodic rebalancing that 148 00:07:12,240 --> 00:07:15,000 Speaker 1: OPEC does is becoming less and less effective for them? 149 00:07:15,080 --> 00:07:17,320 Speaker 1: Is or is it something else when oil? 150 00:07:17,760 --> 00:07:19,840 Speaker 2: It's neither of the above. I think it's about a 151 00:07:20,800 --> 00:07:23,120 Speaker 2: bone just wide at the mark, you know, No, no, 152 00:07:23,200 --> 00:07:26,160 Speaker 2: I mean it's listen, the oil market isn't credibly flexible. 153 00:07:26,160 --> 00:07:28,840 Speaker 2: It always finds a way to do something with the 154 00:07:28,880 --> 00:07:32,440 Speaker 2: excess or to find a shortage, right, and price drives 155 00:07:32,480 --> 00:07:35,160 Speaker 2: all of these things. For context, rent is now about 156 00:07:35,160 --> 00:07:37,920 Speaker 2: sixty one dollars per barrel. We think over twenty twenty 157 00:07:37,960 --> 00:07:40,560 Speaker 2: six is going to average about fifty five dollars per barrel. 158 00:07:40,640 --> 00:07:42,640 Speaker 2: So it's not a huge gap, but we do think 159 00:07:42,640 --> 00:07:45,520 Speaker 2: that it's going to trend down closer towards fifty towards 160 00:07:45,560 --> 00:07:47,880 Speaker 2: the end of the year as this surplus starts to 161 00:07:47,880 --> 00:07:49,320 Speaker 2: build up. But you can do a lot of things. 162 00:07:49,320 --> 00:07:51,520 Speaker 2: You can store it where you have storage on ground. 163 00:07:51,680 --> 00:07:53,920 Speaker 2: China has been doing a great job of just filling 164 00:07:53,960 --> 00:07:56,440 Speaker 2: up its taverns and its storage capacity and buying it 165 00:07:56,440 --> 00:07:58,520 Speaker 2: at a cheap price. You can even storage on a ship. 166 00:07:58,640 --> 00:08:01,720 Speaker 2: So you see rates of hiring out vessels in order 167 00:08:01,800 --> 00:08:04,160 Speaker 2: just to keep them stationary offshore with a bunch of 168 00:08:04,160 --> 00:08:07,000 Speaker 2: crude oil in it increasing. So there's lots of different 169 00:08:07,040 --> 00:08:10,480 Speaker 2: ways you can, let's say, buy cheap oil when it's 170 00:08:10,520 --> 00:08:12,720 Speaker 2: hanging around and keep it until you need it. And 171 00:08:12,760 --> 00:08:14,440 Speaker 2: we've seen that in the past few weeks. 172 00:08:14,640 --> 00:08:17,040 Speaker 1: Okay, it's interesting. So it might be that we see 173 00:08:17,040 --> 00:08:19,880 Speaker 1: this less manifesting in prices and more in the sort 174 00:08:19,880 --> 00:08:23,240 Speaker 1: of the behavior of players in the market, which plan 175 00:08:23,280 --> 00:08:25,720 Speaker 1: of leads me to my next question, which is around 176 00:08:25,800 --> 00:08:29,679 Speaker 1: specifically how all of this impacts US crude production. 177 00:08:30,160 --> 00:08:33,200 Speaker 2: Yeah, so we forecast a much much slower story in 178 00:08:33,280 --> 00:08:36,920 Speaker 2: terms of incremental production from the US out to twenty thirty, 179 00:08:37,080 --> 00:08:39,160 Speaker 2: but there is still growth there and that is probably 180 00:08:39,200 --> 00:08:41,960 Speaker 2: where we're different to some other forecasters. You all maybe 181 00:08:42,000 --> 00:08:45,120 Speaker 2: heard of peak shale or is the jale revolution coming 182 00:08:45,160 --> 00:08:47,320 Speaker 2: to an end, et cetera. We don't believe that. 183 00:08:47,520 --> 00:08:49,280 Speaker 1: So this is a non tipping point for US. 184 00:08:49,280 --> 00:08:51,600 Speaker 2: Non tipping point. If a plateau could be a tipping point, 185 00:08:51,640 --> 00:08:53,480 Speaker 2: this would be a tipping point. I guess, but it's 186 00:08:53,559 --> 00:08:55,439 Speaker 2: you know, you've address it whatever you want. A lot 187 00:08:55,440 --> 00:08:57,480 Speaker 2: of other forecasters are saying we're going to see decline 188 00:08:57,520 --> 00:09:00,360 Speaker 2: in shale. We actually think that the efficiencies the shale 189 00:09:00,400 --> 00:09:02,559 Speaker 2: producers have built out over the past few years are 190 00:09:02,559 --> 00:09:04,760 Speaker 2: now coming to fruition. They can spend a lot less 191 00:09:04,800 --> 00:09:07,600 Speaker 2: and get a lot more, and that's becoming apparent in 192 00:09:07,640 --> 00:09:11,080 Speaker 2: their production profiles. So you might have large oil companies 193 00:09:11,120 --> 00:09:13,960 Speaker 2: in the US indicating let's say five to seven percent 194 00:09:14,080 --> 00:09:16,640 Speaker 2: increase in capex over the next few years and aiming 195 00:09:16,640 --> 00:09:19,920 Speaker 2: for a twenty percent increase in output. You got this detachment, 196 00:09:20,120 --> 00:09:22,200 Speaker 2: whereas for a few years it was like, let's borrow 197 00:09:22,280 --> 00:09:26,240 Speaker 2: just to drill. So the capital discipline has tightened. They're 198 00:09:26,280 --> 00:09:28,800 Speaker 2: being a lot smarter with their money, and technology has 199 00:09:28,800 --> 00:09:31,360 Speaker 2: really allowed them to improve how they drill wells, the 200 00:09:31,400 --> 00:09:34,080 Speaker 2: direction of wells, the efficiency of all of this. But 201 00:09:34,120 --> 00:09:36,720 Speaker 2: you are starting to see costs balance out of that 202 00:09:36,760 --> 00:09:38,880 Speaker 2: incremental investment, right, So they're playing a sort of a 203 00:09:38,920 --> 00:09:40,640 Speaker 2: smarter game than they had done in the past. 204 00:09:40,960 --> 00:09:43,079 Speaker 1: That's so interesting, and it comes back to this thing 205 00:09:43,120 --> 00:09:45,200 Speaker 1: that we're saying is, you know, maybe some of the 206 00:09:45,320 --> 00:09:48,680 Speaker 1: power of OPEC to dictate who's going to be able 207 00:09:48,720 --> 00:09:51,120 Speaker 1: to be profitable has weakened. I mean, I remember in 208 00:09:51,120 --> 00:09:55,040 Speaker 1: twenty twenty was devastating for a lot of shale producers, 209 00:09:55,120 --> 00:09:57,200 Speaker 1: and then that was the start of the era of 210 00:09:57,240 --> 00:10:01,440 Speaker 1: this capital discipline, and now we're seeing more resilient industry 211 00:10:01,600 --> 00:10:03,520 Speaker 1: with maybe more global market power. 212 00:10:03,600 --> 00:10:06,000 Speaker 2: As a result, there all of the small mama pop 213 00:10:06,040 --> 00:10:09,680 Speaker 2: shops merged, they all became part of larger corporations, much 214 00:10:09,679 --> 00:10:11,959 Speaker 2: more financially stable. They go to market, they don't have 215 00:10:12,000 --> 00:10:13,920 Speaker 2: to go to the banks for loans anymore, not at 216 00:10:13,920 --> 00:10:15,840 Speaker 2: the same extent they used to anyway. So it's just 217 00:10:15,880 --> 00:10:18,000 Speaker 2: they're just bigger players. They're more stable. 218 00:10:18,320 --> 00:10:21,720 Speaker 1: And then when we're talking about oil, the other dimension 219 00:10:21,800 --> 00:10:24,640 Speaker 1: in all of this, you know, if we're thinking downstream, 220 00:10:25,000 --> 00:10:27,960 Speaker 1: is what could all of this mean for Petcam's markets 221 00:10:28,320 --> 00:10:31,760 Speaker 1: any significant things happening in twenty twenty six in there? 222 00:10:32,080 --> 00:10:34,680 Speaker 2: Yeah, there is a lot actually, So this is a 223 00:10:34,679 --> 00:10:37,880 Speaker 2: perfect example of a boom bus cycle industry. High prices, 224 00:10:38,280 --> 00:10:41,280 Speaker 2: a lot of new capacity. It's the low prices, it's 225 00:10:41,280 --> 00:10:43,520 Speaker 2: the closures in all capacity, and we're going through this 226 00:10:43,640 --> 00:10:46,080 Speaker 2: really tight pinch where you're seeing a lot a lot 227 00:10:46,080 --> 00:10:49,040 Speaker 2: of capacity coming on, particularly in India and in China 228 00:10:49,080 --> 00:10:52,240 Speaker 2: and Southeast Asia, and a lot of capacity in Europe 229 00:10:52,280 --> 00:10:54,880 Speaker 2: and the US really struggling with weak margins as a 230 00:10:54,880 --> 00:10:57,520 Speaker 2: result of that, particularly in Europe. You're seeing a lot 231 00:10:57,520 --> 00:11:00,000 Speaker 2: of closures in Europe when it comes to these facilities. 232 00:11:00,320 --> 00:11:02,320 Speaker 1: It's like the pattern that we've seen in all of 233 00:11:02,320 --> 00:11:05,000 Speaker 1: the renewable energy industries as well playing out. You know, 234 00:11:05,080 --> 00:11:08,200 Speaker 1: capacity moving to Asia. So what does that mean for 235 00:11:08,880 --> 00:11:13,360 Speaker 1: China specifically? You know, firstly, why is so much capacity 236 00:11:13,360 --> 00:11:15,920 Speaker 1: building up in China around this and is that going 237 00:11:15,960 --> 00:11:19,920 Speaker 1: to be a profitable industry for those producers as well 238 00:11:19,960 --> 00:11:22,160 Speaker 1: or are they working on really thin margins? 239 00:11:22,440 --> 00:11:25,640 Speaker 2: Yeah, profitable and China is a really great question because 240 00:11:25,800 --> 00:11:28,480 Speaker 2: maybe maybe not. You never really have the transparency on 241 00:11:28,520 --> 00:11:31,120 Speaker 2: the data. What China loves to do is to solve 242 00:11:31,240 --> 00:11:34,400 Speaker 2: for its biggest short So if it's relying on importing 243 00:11:34,720 --> 00:11:38,480 Speaker 2: products like gasoline or JEF fuel or diesel, we've seen 244 00:11:38,520 --> 00:11:41,040 Speaker 2: them in the past build the refining capacity so that 245 00:11:41,080 --> 00:11:43,679 Speaker 2: they can supply themselves. Right, So they're doing the exact 246 00:11:43,679 --> 00:11:47,479 Speaker 2: same thing in the petrochemical sector. They currently import polyathylene 247 00:11:47,480 --> 00:11:49,520 Speaker 2: from different parts around the world, and what they're trying 248 00:11:49,559 --> 00:11:51,720 Speaker 2: to do is to build facilities so that they can 249 00:11:51,760 --> 00:11:54,640 Speaker 2: produce that polyathlene domestically. So we have this big build 250 00:11:54,640 --> 00:11:57,840 Speaker 2: out over the next couple of years of polyethylene production 251 00:11:57,920 --> 00:12:01,920 Speaker 2: capacity and polyethylene stuff that goes into plastics right right 252 00:12:02,000 --> 00:12:06,320 Speaker 2: into manufacturing cars for example, really televisions, and they are 253 00:12:06,360 --> 00:12:08,640 Speaker 2: basically trying to solve that short. They're very close to 254 00:12:08,679 --> 00:12:10,560 Speaker 2: doing so as well, so we would think at that 255 00:12:10,600 --> 00:12:12,920 Speaker 2: stage the build that would probably slow down. And what 256 00:12:13,000 --> 00:12:15,440 Speaker 2: they've started to do with the other products which they 257 00:12:15,440 --> 00:12:18,120 Speaker 2: now have excess capacity of is sell that into the 258 00:12:18,120 --> 00:12:21,040 Speaker 2: international market. So a great example is gasoline, Right, there's 259 00:12:21,080 --> 00:12:23,199 Speaker 2: a ton of vvs in China. They have a ton 260 00:12:23,240 --> 00:12:26,280 Speaker 2: of refining capacity and they have more gasoline than they 261 00:12:26,280 --> 00:12:28,040 Speaker 2: consume and they sell it out into the market. 262 00:12:28,400 --> 00:12:32,280 Speaker 1: Right, So it's almost like Chinese self sufficiency or the 263 00:12:32,400 --> 00:12:36,200 Speaker 1: drived self sufficiency in China means over capacity for the 264 00:12:36,200 --> 00:12:36,920 Speaker 1: rest of the world. 265 00:12:37,360 --> 00:12:39,400 Speaker 2: Yeah, I mean the elephant in the room when it 266 00:12:39,400 --> 00:12:41,920 Speaker 2: comes to it is it doesn't have enough oil right, right, 267 00:12:42,000 --> 00:12:45,280 Speaker 2: there's not enough crude oil, and you can't just build 268 00:12:45,440 --> 00:12:48,600 Speaker 2: to solve that short. You have to import because you 269 00:12:48,600 --> 00:12:50,080 Speaker 2: can either take it out of the ground or you 270 00:12:50,120 --> 00:12:53,040 Speaker 2: cannot right, So that is a big problem, I suppose 271 00:12:53,040 --> 00:12:55,120 Speaker 2: in terms of the weak point of that strategy. But 272 00:12:55,320 --> 00:12:57,800 Speaker 2: this is why they store so much oil in China. 273 00:12:57,840 --> 00:12:59,640 Speaker 2: This is why they are the biggest buyers in the world. 274 00:12:59,840 --> 00:13:02,520 Speaker 2: Is why they have all of this capacity, much bigger 275 00:13:02,559 --> 00:13:05,640 Speaker 2: than the US to stock oil. And they've had a 276 00:13:05,640 --> 00:13:07,280 Speaker 2: great time over the past few years and being able 277 00:13:07,280 --> 00:13:09,800 Speaker 2: to source super barrels. I mean, whilst we're. 278 00:13:09,720 --> 00:13:13,560 Speaker 1: On the topic of you know, securing supply, you know, 279 00:13:13,600 --> 00:13:18,120 Speaker 1: at the time of recording, the president of Venezuela has 280 00:13:18,320 --> 00:13:22,880 Speaker 1: been taken to New York to face charges by the US. 281 00:13:22,880 --> 00:13:25,760 Speaker 1: So there's a lot of uncertainty what's happening in Venezuela, 282 00:13:25,800 --> 00:13:28,200 Speaker 1: and oil is being talked about a lot there. So 283 00:13:28,520 --> 00:13:31,839 Speaker 1: what does all of this mean for US oil and 284 00:13:32,000 --> 00:13:35,600 Speaker 1: US energy security and just generally the oil market generally. 285 00:13:35,480 --> 00:13:38,280 Speaker 2: Yeah, there's a ton of question marks. What does it 286 00:13:38,280 --> 00:13:40,520 Speaker 2: even mean for the oil market? Who is in charge, 287 00:13:40,559 --> 00:13:42,120 Speaker 2: Who's going to get oil out, who's going to keep 288 00:13:42,120 --> 00:13:46,240 Speaker 2: oil in? Venezuela produces a very heavy oil mutrik into 289 00:13:46,480 --> 00:13:51,000 Speaker 2: Canadian oil, which US refiners are really perfectly suited to process. 290 00:13:51,240 --> 00:13:54,240 Speaker 2: They built themselves actually off of the concept of having 291 00:13:54,240 --> 00:13:57,400 Speaker 2: the import available from a Venezuelan barol, for example, so 292 00:13:57,400 --> 00:14:00,320 Speaker 2: they can take a high sulfur heavy barrel and it 293 00:14:00,320 --> 00:14:03,560 Speaker 2: into high class products like gasoline, golf. Coast refiners are 294 00:14:03,600 --> 00:14:05,880 Speaker 2: a perfectly place to do it. Venezuela has had years 295 00:14:05,880 --> 00:14:09,199 Speaker 2: of neglect in the oil industry in Venezuela, and production 296 00:14:09,280 --> 00:14:11,240 Speaker 2: has gone from about two and a half million barrows 297 00:14:11,280 --> 00:14:14,040 Speaker 2: per day around twenty ten to twenty fifteen down to 298 00:14:14,120 --> 00:14:16,160 Speaker 2: about just under a million baros per day that we 299 00:14:16,240 --> 00:14:17,480 Speaker 2: know of now. And I say that we know of 300 00:14:17,559 --> 00:14:20,000 Speaker 2: because the data's pretty difficult to track and it's not 301 00:14:20,080 --> 00:14:22,320 Speaker 2: overnight that you can go and send an oil major 302 00:14:22,360 --> 00:14:24,320 Speaker 2: in turn that back on and have it back into 303 00:14:24,320 --> 00:14:26,080 Speaker 2: the market. Right, It's going to take a lot of time. 304 00:14:26,240 --> 00:14:28,360 Speaker 2: If it does, though, they will compete with the likes 305 00:14:28,400 --> 00:14:32,200 Speaker 2: of Canadian barrels or even Columbian barrels or Mexican barrels, 306 00:14:32,240 --> 00:14:34,280 Speaker 2: which will then find their way somewhere else into the 307 00:14:34,320 --> 00:14:36,360 Speaker 2: world and the market will have to solve for that. 308 00:14:36,440 --> 00:14:39,080 Speaker 2: But it is an interesting time because there's a lot 309 00:14:39,080 --> 00:14:41,520 Speaker 2: of excitement around getting the soil out onto the market, 310 00:14:41,600 --> 00:14:43,280 Speaker 2: but it won't be that fast It's not going to 311 00:14:43,320 --> 00:14:45,880 Speaker 2: happen overnight. It doesn't turn this two or three million 312 00:14:45,880 --> 00:14:47,840 Speaker 2: barrel surplus. So I was talking about at the start 313 00:14:48,000 --> 00:14:50,360 Speaker 2: into a two and a half million barrows per day 314 00:14:50,480 --> 00:14:52,480 Speaker 2: larger surplus. It takes a lot of time for that 315 00:14:52,520 --> 00:14:52,960 Speaker 2: to come out. 316 00:14:53,880 --> 00:14:55,320 Speaker 1: And the other question I have, I mean, if you're 317 00:14:55,360 --> 00:14:58,600 Speaker 1: making the comparison to Canadian crud is and in my 318 00:14:58,680 --> 00:15:01,080 Speaker 1: limits and understanding, you might correct me, but I know 319 00:15:01,120 --> 00:15:03,560 Speaker 1: at a certain point in time, the narrative was that 320 00:15:03,720 --> 00:15:06,720 Speaker 1: Canadian crud is, you know, very much on the margin, 321 00:15:06,920 --> 00:15:09,560 Speaker 1: you know, not the most competitive from a cost point 322 00:15:09,600 --> 00:15:12,240 Speaker 1: of view. Is the same truth for Venezuelan. 323 00:15:11,680 --> 00:15:14,400 Speaker 2: Oil and what Canadian is actually pretty competitive from a 324 00:15:14,440 --> 00:15:16,600 Speaker 2: cost point of view in terms of like a green 325 00:15:16,680 --> 00:15:19,400 Speaker 2: field in Canada, that's quite expensive, but in terms of 326 00:15:19,440 --> 00:15:22,000 Speaker 2: brown field and what that means, green is like brand 327 00:15:22,000 --> 00:15:25,200 Speaker 2: new brown weans continuing to operate what is already there, 328 00:15:25,360 --> 00:15:27,640 Speaker 2: and the costs are pretty low for Canadian actually got it, 329 00:15:27,760 --> 00:15:30,120 Speaker 2: and so it can trickle through, it can compete pretty well. 330 00:15:30,360 --> 00:15:32,960 Speaker 2: So it's in a pretty good place. The big difficulty 331 00:15:33,000 --> 00:15:34,760 Speaker 2: is getting it out right. You can get it to 332 00:15:34,800 --> 00:15:38,480 Speaker 2: the US pretty easily, you can't really get it anywhere else, right, right, right, 333 00:15:38,800 --> 00:15:41,520 Speaker 2: So they're kind of stuck there with the US for 334 00:15:41,640 --> 00:15:44,480 Speaker 2: now unless they build out infrastructure, which we've heard about. 335 00:15:44,560 --> 00:15:46,480 Speaker 2: So let's see what happens there. I guess the big 336 00:15:46,560 --> 00:15:49,360 Speaker 2: question mark is if if you're an oil company, like, 337 00:15:49,400 --> 00:15:52,120 Speaker 2: why would you risk going into Venezuela and throwing tons 338 00:15:52,120 --> 00:15:54,760 Speaker 2: of cash into a market that's pretty risky when you 339 00:15:54,800 --> 00:15:58,200 Speaker 2: could go to neighboring Guyana, or you could invest somewhere else, 340 00:15:58,240 --> 00:16:01,360 Speaker 2: maybe Brazil, maybe Colombia, maybe any of those other markets 341 00:16:01,360 --> 00:16:04,040 Speaker 2: that are a bit more stable. When Venezuela was the 342 00:16:04,120 --> 00:16:07,320 Speaker 2: king of oil in South America fifteen twenty years ago, 343 00:16:07,520 --> 00:16:11,760 Speaker 2: nobody else really competed with it. Brazil has since increased 344 00:16:11,800 --> 00:16:14,280 Speaker 2: by over two million boos per day of production, Guyana 345 00:16:14,320 --> 00:16:16,800 Speaker 2: by over one million bows per day production. You're seeing 346 00:16:16,800 --> 00:16:20,040 Speaker 2: a bit of a revolution in Argentina around the shale 347 00:16:20,040 --> 00:16:22,280 Speaker 2: plays down there. So you had all these markets that 348 00:16:22,320 --> 00:16:25,480 Speaker 2: weren't really big players back in the day when Venezuela 349 00:16:25,520 --> 00:16:28,400 Speaker 2: was the big player. I know they're bigger. Brazil will 350 00:16:28,440 --> 00:16:31,360 Speaker 2: be bigger than Venezuela was at its peak, So the 351 00:16:31,400 --> 00:16:33,920 Speaker 2: market's completely changed there, So we might be treating it 352 00:16:33,960 --> 00:16:35,880 Speaker 2: as well. It worked like this before, so it will 353 00:16:35,880 --> 00:16:37,840 Speaker 2: probably work like this again, and I don't think that's 354 00:16:37,880 --> 00:16:38,240 Speaker 2: the case. 355 00:16:38,360 --> 00:16:40,000 Speaker 1: It's interesting, I mean, and it comes back to this 356 00:16:40,040 --> 00:16:43,360 Speaker 1: theme of tipping points and things in twenty twenty six 357 00:16:43,480 --> 00:16:46,040 Speaker 1: being different to how they were. So we have an 358 00:16:46,040 --> 00:16:49,320 Speaker 1: oil rich nation with political uncertainty, and I think our 359 00:16:49,720 --> 00:16:52,440 Speaker 1: off the shelf narrative of that is, you know, oh, well, 360 00:16:52,440 --> 00:16:54,240 Speaker 1: of course someone's going to be wanting to get their 361 00:16:54,280 --> 00:16:57,160 Speaker 1: hands on the oil. But right now it seems like 362 00:16:57,360 --> 00:16:59,160 Speaker 1: I wouldn't want to say it's hardly worth it. But 363 00:16:59,280 --> 00:17:03,320 Speaker 1: there's no uh for that because there's a surplus elsewhere, 364 00:17:03,480 --> 00:17:05,960 Speaker 1: and as you say, there are better options. 365 00:17:06,240 --> 00:17:08,679 Speaker 2: Yeah, I mean, oil is a depleting business. You have 366 00:17:08,720 --> 00:17:11,320 Speaker 2: to just spend money to stay flat, right. That is 367 00:17:11,359 --> 00:17:13,240 Speaker 2: just the function of the market. So this is a 368 00:17:13,280 --> 00:17:16,080 Speaker 2: longer term play, if anything. If the objective is to 369 00:17:16,119 --> 00:17:18,760 Speaker 2: go to Venezuela in order to secure future powers, this 370 00:17:18,920 --> 00:17:20,720 Speaker 2: is the objective. It's not to get them onto the 371 00:17:20,760 --> 00:17:23,080 Speaker 2: market in the next two to three years. This is 372 00:17:23,280 --> 00:17:24,480 Speaker 2: further down the line than that. 373 00:17:24,760 --> 00:17:27,520 Speaker 1: Let's switch gears and bringing Rique into the conversation because 374 00:17:27,560 --> 00:17:29,760 Speaker 1: we've been talking about oil a lot and we've been 375 00:17:29,840 --> 00:17:31,720 Speaker 1: talking about, you know, in particular how some of this 376 00:17:31,800 --> 00:17:36,040 Speaker 1: affects the US. Now you focus on US gas, which 377 00:17:36,080 --> 00:17:40,399 Speaker 1: is potentially of pivotal importance to global gas. So what 378 00:17:40,440 --> 00:17:41,840 Speaker 1: do you think has been the sort of the key 379 00:17:41,880 --> 00:17:43,879 Speaker 1: feature in our view of what's going to change in 380 00:17:43,920 --> 00:17:45,880 Speaker 1: twenty twenty six, maybe starting with the US and then 381 00:17:45,880 --> 00:17:47,399 Speaker 1: we'll move onto the global picture. 382 00:17:47,600 --> 00:17:50,520 Speaker 3: Yeah, No, as you mentioned, Yeah, the US I think 383 00:17:50,760 --> 00:17:54,520 Speaker 3: now more than ever place a huge role, specially in 384 00:17:54,840 --> 00:17:58,720 Speaker 3: global LNG markets liquefied natural gas markets. A few years 385 00:17:58,760 --> 00:18:02,920 Speaker 3: ago it surpassed Katar as the biggest exporter of LNG. 386 00:18:03,240 --> 00:18:05,320 Speaker 3: And yeah, in the US, we continue to see the 387 00:18:05,320 --> 00:18:09,720 Speaker 3: country build out LNG exporting capacity. So twenty twenty five 388 00:18:09,880 --> 00:18:13,040 Speaker 3: was kind of the kickoff of the second wave of facilities. 389 00:18:13,200 --> 00:18:15,600 Speaker 3: We also saw a lot of new facilities reach a 390 00:18:15,800 --> 00:18:19,679 Speaker 3: final investment decision, so we have a lot more capacity 391 00:18:19,720 --> 00:18:23,080 Speaker 3: coming online. It should double between twenty twenty five and 392 00:18:23,119 --> 00:18:26,680 Speaker 3: twenty thirty, so really flooding the market in a way 393 00:18:26,720 --> 00:18:29,280 Speaker 3: with a lot more liquefied natural gas. 394 00:18:29,320 --> 00:18:31,560 Speaker 1: So twenty twenty six is kind of the start of 395 00:18:31,600 --> 00:18:34,199 Speaker 1: a new phase on something that's already huge, which is 396 00:18:34,520 --> 00:18:37,280 Speaker 1: US LNG exports. But I suppose it's one thing that 397 00:18:37,400 --> 00:18:39,800 Speaker 1: US being the biggest player, because someone has to be 398 00:18:39,840 --> 00:18:41,840 Speaker 1: the biggest player, right, So the fact that the US 399 00:18:41,920 --> 00:18:44,879 Speaker 1: is the biggest player doesn't necessarily have global significance. But 400 00:18:44,920 --> 00:18:48,320 Speaker 1: if the biggest player is then ramping up to another level, 401 00:18:48,359 --> 00:18:51,040 Speaker 1: then that does. And are we saying that twenty twenty 402 00:18:51,040 --> 00:18:53,160 Speaker 1: six is the year we start to see the beginnings 403 00:18:53,200 --> 00:18:56,520 Speaker 1: of a new phase of the global LNG market because 404 00:18:56,520 --> 00:18:57,720 Speaker 1: of what's happening in the US. 405 00:18:58,119 --> 00:19:00,680 Speaker 3: Yeah, it's more like the continuation of the US still 406 00:19:01,040 --> 00:19:04,399 Speaker 3: stepping on the gas right to build new facilita and 407 00:19:04,440 --> 00:19:10,159 Speaker 3: then yeah, and then katar as well joining in twenty 408 00:19:10,200 --> 00:19:14,080 Speaker 3: twenty six with the Northfield expansion, so also adding a 409 00:19:14,119 --> 00:19:17,080 Speaker 3: lot more capacity. And the difference was that, Yeah, before 410 00:19:17,119 --> 00:19:20,000 Speaker 3: it was kind of the US leading the way alone. 411 00:19:20,040 --> 00:19:23,400 Speaker 3: There were there's also a few other countries Australia, Mexico 412 00:19:23,960 --> 00:19:26,480 Speaker 3: and then in Africa there's some more capacity. But now 413 00:19:26,520 --> 00:19:29,479 Speaker 3: we have the second biggest player joining the party in 414 00:19:29,520 --> 00:19:31,880 Speaker 3: a way, so things are picking up. 415 00:19:32,440 --> 00:19:36,040 Speaker 1: So how is this going to affect LNG prices in 416 00:19:36,119 --> 00:19:36,600 Speaker 1: twenty six? 417 00:19:36,920 --> 00:19:37,120 Speaker 2: Yeah? 418 00:19:37,160 --> 00:19:40,040 Speaker 3: No, First thinking about the demand side, we are expecting 419 00:19:40,119 --> 00:19:44,040 Speaker 3: demand for liquefied natural guests to increase global first, Asia 420 00:19:44,240 --> 00:19:46,760 Speaker 3: is the place we see that will drive that growth, 421 00:19:46,800 --> 00:19:50,240 Speaker 3: as like many countries there, continue to industrialize but also 422 00:19:50,280 --> 00:19:53,920 Speaker 3: seek to decarbonize. We have markets like India where they're 423 00:19:53,960 --> 00:19:58,080 Speaker 3: still investing heavily in their infrastructure and we expect industrial 424 00:19:58,119 --> 00:20:01,040 Speaker 3: demand to increase. There is a dec amount of buildout 425 00:20:01,040 --> 00:20:04,640 Speaker 3: of new gas fired power plants as well. Maybe when 426 00:20:04,640 --> 00:20:07,240 Speaker 3: we're thinking of Asia, China's where we haven't seen as 427 00:20:07,480 --> 00:20:10,080 Speaker 3: much growth as some we're expecting, so there's there's some 428 00:20:10,240 --> 00:20:12,560 Speaker 3: risks there. And then you also have Europe that's a 429 00:20:12,600 --> 00:20:15,920 Speaker 3: pretty large consumer of energy, where we expect gas will 430 00:20:15,920 --> 00:20:19,400 Speaker 3: stick for longer than we originally thought. But the fact 431 00:20:19,520 --> 00:20:23,520 Speaker 3: is supply is increasing so rapidly that we're expecting it 432 00:20:23,600 --> 00:20:26,320 Speaker 3: to outpace demand by twenty twenty seven. 433 00:20:26,600 --> 00:20:30,679 Speaker 1: So sort of a couple of years of abundant cheat. 434 00:20:30,680 --> 00:20:34,960 Speaker 3: Energy, Yeah, exactly, Like out to twenty thirty, we're expecting 435 00:20:35,000 --> 00:20:38,160 Speaker 3: the market to remain pretty loose, and then of course 436 00:20:38,200 --> 00:20:41,240 Speaker 3: you get that access supply prices are expected to drop. 437 00:20:41,400 --> 00:20:43,679 Speaker 3: But at the end of the day, for example, to 438 00:20:43,800 --> 00:20:45,800 Speaker 3: unlock a lot of new demand, you would need to 439 00:20:45,840 --> 00:20:48,520 Speaker 3: be able to replace coal right, and for that to happen, 440 00:20:48,560 --> 00:20:51,520 Speaker 3: you would need extremely low energy prices to the point 441 00:20:51,560 --> 00:20:54,720 Speaker 3: where it would no longer make sense to export that 442 00:20:54,920 --> 00:20:57,119 Speaker 3: energy because you just don't have that margin. 443 00:20:57,560 --> 00:20:59,400 Speaker 1: Let me just make sure I understand what you're saying 444 00:20:59,440 --> 00:21:03,240 Speaker 1: is to replace coal, you need to build the gas capacity, 445 00:21:03,400 --> 00:21:06,440 Speaker 1: So you need a lower gas price than just to 446 00:21:06,480 --> 00:21:09,920 Speaker 1: displace coal with an existing gas plant. Right, But then 447 00:21:10,119 --> 00:21:12,040 Speaker 1: for the gas price to be that low, it's not 448 00:21:12,080 --> 00:21:16,000 Speaker 1: going to be enough to incentivize, you know, expansion of capacity. 449 00:21:16,080 --> 00:21:18,320 Speaker 1: So that's sort of the limit we run into at 450 00:21:18,320 --> 00:21:18,720 Speaker 1: the moment. 451 00:21:19,000 --> 00:21:22,000 Speaker 3: Yeah, and goal is so cheap in that like some 452 00:21:22,080 --> 00:21:25,480 Speaker 3: of these countries that yeah, gas is ease country being 453 00:21:26,240 --> 00:21:29,920 Speaker 3: for example, like China and India to the point where, yeah, 454 00:21:30,040 --> 00:21:33,200 Speaker 3: using lergy for power to replace coal wouldn't make sense 455 00:21:33,280 --> 00:21:35,240 Speaker 3: just on an economics based. 456 00:21:35,359 --> 00:21:37,440 Speaker 1: So this is a sort of a story that really 457 00:21:37,480 --> 00:21:41,480 Speaker 1: impacts say Europe in terms of you know, the consumers, 458 00:21:41,560 --> 00:21:45,160 Speaker 1: and then say Japan and maybe Korea as the sort 459 00:21:45,200 --> 00:21:47,960 Speaker 1: of the countries that would be making use of this energy. 460 00:21:48,480 --> 00:21:51,920 Speaker 3: Yeah, and also like the other area where we see 461 00:21:52,359 --> 00:21:56,080 Speaker 3: I think also across Asia where the surplus could be absorbed. 462 00:21:56,080 --> 00:21:58,879 Speaker 3: This on the industry side of things, so replacing some 463 00:21:59,000 --> 00:22:01,800 Speaker 3: fuel oil again, Like the point where I'm trying to 464 00:22:01,920 --> 00:22:04,680 Speaker 3: drive us to is, yeah, that this oversupply might might 465 00:22:04,720 --> 00:22:07,520 Speaker 3: be big enough that even with lower prices, there might 466 00:22:07,560 --> 00:22:10,119 Speaker 3: not be enough demand out there. So we might actually 467 00:22:10,160 --> 00:22:12,879 Speaker 3: get to a situation where you have to close some 468 00:22:13,000 --> 00:22:16,200 Speaker 3: of your L and G export facilities right and stop 469 00:22:16,240 --> 00:22:20,080 Speaker 3: liquefying that gas until the prices makes the ense again 470 00:22:20,280 --> 00:22:22,440 Speaker 3: or the demand shows up in the market. 471 00:22:22,720 --> 00:22:25,520 Speaker 1: The other dimension, well, the other part of this equation 472 00:22:25,600 --> 00:22:29,040 Speaker 1: that I find interesting is how this affects gas in 473 00:22:29,080 --> 00:22:32,200 Speaker 1: the US. I've been in the US since twenty twenty one, 474 00:22:32,480 --> 00:22:35,639 Speaker 1: been doing analysis on the US since twenty twenty and 475 00:22:36,000 --> 00:22:37,639 Speaker 1: as someone look at the power sector, the thing I 476 00:22:37,680 --> 00:22:39,760 Speaker 1: had to get used to is is how cheap gases 477 00:22:40,040 --> 00:22:41,720 Speaker 1: in the US compared to the rest of lot It 478 00:22:41,840 --> 00:22:44,000 Speaker 1: sort of changes everything. And the narrative has sort of 479 00:22:44,040 --> 00:22:46,280 Speaker 1: always been it's like the gas is boxed into the 480 00:22:46,320 --> 00:22:49,200 Speaker 1: country because there's not enough capacity to export it. That's 481 00:22:49,240 --> 00:22:52,360 Speaker 1: beginning to change, right from what you're describing. So are 482 00:22:52,359 --> 00:22:55,800 Speaker 1: we seeing up with pressure on US natural gas prices? 483 00:22:55,920 --> 00:22:58,080 Speaker 1: Are we expecting to see a big change there? In 484 00:22:58,080 --> 00:22:58,919 Speaker 1: twenty twenty. 485 00:22:58,680 --> 00:23:02,040 Speaker 3: Six yeah, it's I think even already now we've felt 486 00:23:02,040 --> 00:23:04,960 Speaker 3: the pressure that energ has put on the market since 487 00:23:05,000 --> 00:23:07,240 Speaker 3: the start of the second half of twenty twenty five, 488 00:23:07,359 --> 00:23:11,439 Speaker 3: as we had a black and Mint's lngs the liquefaction 489 00:23:11,560 --> 00:23:16,040 Speaker 3: facilities start to ramp up. We already started seeing prices 490 00:23:16,040 --> 00:23:18,960 Speaker 3: fuel that pressure and start to rise. One of the 491 00:23:19,080 --> 00:23:23,399 Speaker 3: largest facilities, especially going into the winter. We started with 492 00:23:23,480 --> 00:23:26,320 Speaker 3: a pretty cold December, we saw price a spike. I 493 00:23:26,320 --> 00:23:29,040 Speaker 3: think we got up to five dollars. And one of 494 00:23:29,080 --> 00:23:32,240 Speaker 3: the big differences if we go back even three four 495 00:23:32,320 --> 00:23:35,320 Speaker 3: years back, or something to think about more than a difference, 496 00:23:35,400 --> 00:23:38,560 Speaker 3: is you still have the same amount of storage capacity. 497 00:23:38,680 --> 00:23:42,360 Speaker 3: So with these lergy facilities you have potentially a lot 498 00:23:42,440 --> 00:23:45,760 Speaker 3: more demand while you're buffer right for the winter when 499 00:23:45,760 --> 00:23:48,960 Speaker 3: you have more demand than you have supply staying the same. 500 00:23:49,359 --> 00:23:52,240 Speaker 3: So it does open the door for more volatility as 501 00:23:52,240 --> 00:23:54,160 Speaker 3: well besides higher prices. 502 00:23:54,400 --> 00:23:56,520 Speaker 1: It's interesting, I mean, and we come back to this 503 00:23:56,600 --> 00:24:00,480 Speaker 1: theme of the sort of tipping points ioinants that were 504 00:24:00,520 --> 00:24:03,080 Speaker 1: sort of always on the cards, but maybe twenty twenty 505 00:24:03,119 --> 00:24:05,400 Speaker 1: six is when those cards come in because we're seeing 506 00:24:05,720 --> 00:24:09,719 Speaker 1: falling natural gas prices globally and rising natural gas prices 507 00:24:09,720 --> 00:24:12,320 Speaker 1: in the US. So like the logical end game of 508 00:24:12,520 --> 00:24:17,080 Speaker 1: the US expanding its lng xport capacity is a convergence 509 00:24:17,160 --> 00:24:20,120 Speaker 1: between global and US natural gas prices. I'm not saying 510 00:24:20,080 --> 00:24:21,560 Speaker 1: we're that yet, because I think if you go to 511 00:24:21,600 --> 00:24:24,520 Speaker 1: Europe and say five dollars per mmbtu, you've converted that 512 00:24:24,560 --> 00:24:28,600 Speaker 1: into mega our euros permegal hour, that's still yeah, that's 513 00:24:28,600 --> 00:24:31,800 Speaker 1: still pretty cheap if you're in Europe. But maybe twenty 514 00:24:31,800 --> 00:24:34,239 Speaker 1: twenty six we're starting to see the start of a 515 00:24:34,359 --> 00:24:38,400 Speaker 1: meaningful price convergence between the global and the US pictures. 516 00:24:38,640 --> 00:24:41,560 Speaker 3: Yeah, and we're already seeing not only the prices in 517 00:24:41,600 --> 00:24:44,920 Speaker 3: Europe in the forward curb dropping in the anticipation right 518 00:24:44,960 --> 00:24:48,040 Speaker 3: of all this new supply that's coming into the market, 519 00:24:48,160 --> 00:24:52,760 Speaker 3: but we've also seen the Japan Korea marker, the forward 520 00:24:52,760 --> 00:24:56,439 Speaker 3: curve for those prices fall as well in anticipation of 521 00:24:56,520 --> 00:24:59,879 Speaker 3: all this new supply. So it's something the market's already 522 00:25:00,080 --> 00:25:03,000 Speaker 3: expecting to happen. And of course, yeah, this spread between 523 00:25:03,160 --> 00:25:06,520 Speaker 3: Henry Harbor and this global prices tightening up. 524 00:25:06,480 --> 00:25:10,000 Speaker 1: It's fascinating. So it's almost like twenty twenty six could 525 00:25:10,000 --> 00:25:13,560 Speaker 1: be the beginning of a new phase for the global 526 00:25:13,560 --> 00:25:16,200 Speaker 1: gas market and the US gas market. Maybe we won't 527 00:25:16,240 --> 00:25:18,360 Speaker 1: be talking about them separately so much anymore. 528 00:25:18,800 --> 00:25:19,040 Speaker 2: Yeah. 529 00:25:19,040 --> 00:25:22,919 Speaker 3: No, I think twenty twenty six and till the end 530 00:25:22,960 --> 00:25:26,000 Speaker 3: of the decade is definitely a big shift. I think 531 00:25:26,040 --> 00:25:29,360 Speaker 3: the gas market has evolved from yeah, market that typically 532 00:25:29,440 --> 00:25:33,840 Speaker 3: has been very regional or not as interconnected globally, to 533 00:25:34,680 --> 00:25:38,240 Speaker 3: something that's becoming completely different than what we were used 534 00:25:38,280 --> 00:25:38,920 Speaker 3: to before. 535 00:25:39,160 --> 00:25:42,120 Speaker 1: Let's move on to another commodity that is really interesting 536 00:25:42,160 --> 00:25:45,119 Speaker 1: to us, and that is renewable fuels. And I know 537 00:25:45,200 --> 00:25:48,439 Speaker 1: that there was a part of the report we published 538 00:25:48,560 --> 00:25:50,879 Speaker 1: was looking at what's going on in China with renewable fuels, 539 00:25:50,880 --> 00:25:52,160 Speaker 1: So David tell us more. 540 00:25:52,520 --> 00:25:55,440 Speaker 2: Yeah, this is an interesting market. So you go talking 541 00:25:55,440 --> 00:25:57,680 Speaker 2: about oil, which is very cool, to renewable fuels, which 542 00:25:57,680 --> 00:25:59,679 Speaker 2: I feel like is the real athlete of the classroom, 543 00:26:00,280 --> 00:26:03,359 Speaker 2: which I also enjoy. It's a really interesting market because 544 00:26:03,359 --> 00:26:05,560 Speaker 2: you know, China's more than half of every story in 545 00:26:05,640 --> 00:26:09,160 Speaker 2: every renewable except for renewable fuels. They don't have mandates 546 00:26:09,160 --> 00:26:11,920 Speaker 2: for gasoline like they do here in the US, or 547 00:26:11,960 --> 00:26:14,560 Speaker 2: they do in Brazil or in Europe. But I think 548 00:26:14,600 --> 00:26:16,560 Speaker 2: this is the year I'll call it that they that 549 00:26:16,560 --> 00:26:19,320 Speaker 2: they tip into being a leader specifically in this sustainable 550 00:26:19,400 --> 00:26:22,040 Speaker 2: aviation fuel, so the saf market. And the reason for 551 00:26:22,080 --> 00:26:24,000 Speaker 2: this is if China says it's going to do something, 552 00:26:24,200 --> 00:26:26,160 Speaker 2: it does it, and it doesn't do it in five years, 553 00:26:26,200 --> 00:26:27,679 Speaker 2: it does it when it says is going to do it. 554 00:26:28,000 --> 00:26:30,840 Speaker 2: In March, they have their five year plan where the 555 00:26:30,920 --> 00:26:33,200 Speaker 2: latest five year plan will be announced and there's i'll 556 00:26:33,200 --> 00:26:36,960 Speaker 2: emphasize rumors and whispers that within that there'll be a 557 00:26:37,000 --> 00:26:40,359 Speaker 2: mandate for sustainable aviation fuel that is currently limited to 558 00:26:40,440 --> 00:26:43,439 Speaker 2: places like Europe where you see a blend mandate for 559 00:26:43,480 --> 00:26:46,120 Speaker 2: twenty thirty depending on the country, between five and ten 560 00:26:46,160 --> 00:26:49,720 Speaker 2: percent for example, or in Singapore. Interesting, but not the 561 00:26:49,800 --> 00:26:52,920 Speaker 2: hugest markets. China huge market, and if they say they're 562 00:26:52,920 --> 00:26:55,080 Speaker 2: going to do it, they will do it. Another interesting 563 00:26:55,119 --> 00:26:57,640 Speaker 2: part behind it is China has for the longest time 564 00:26:57,720 --> 00:26:59,800 Speaker 2: been sending used cooking oil, which is one of the 565 00:26:59,880 --> 00:27:04,640 Speaker 2: lost carbon feedstocks, to create sustainable aviation fuel around the world. 566 00:27:04,720 --> 00:27:06,199 Speaker 2: So they've been sending it to Europe and they've been 567 00:27:06,240 --> 00:27:07,920 Speaker 2: sending it to the US, and there's been a lot 568 00:27:07,920 --> 00:27:12,280 Speaker 2: of controversy around how used that cooking oil actually was 569 00:27:12,280 --> 00:27:14,240 Speaker 2: was it used once? Did they use it just to 570 00:27:14,240 --> 00:27:16,560 Speaker 2: say it was used? Lots of classification, so there's been 571 00:27:16,600 --> 00:27:18,320 Speaker 2: a lot of restrictions on those imports. 572 00:27:18,560 --> 00:27:24,960 Speaker 1: I love the idea of someone doing some token cooking, yeah. 573 00:27:23,080 --> 00:27:24,399 Speaker 2: But the big difference is now they have a lot 574 00:27:24,440 --> 00:27:26,240 Speaker 2: of use cooking oil in China, right, so they don't 575 00:27:26,240 --> 00:27:28,760 Speaker 2: need to export it. They can produce it their sustainable 576 00:27:28,800 --> 00:27:31,960 Speaker 2: aviation fuel domestically from that U code used cooking oil. 577 00:27:32,200 --> 00:27:35,240 Speaker 2: And what we've seen is the build out and capacity 578 00:27:35,480 --> 00:27:38,200 Speaker 2: of over a billion gallon schedule for twenty twenty six 579 00:27:38,280 --> 00:27:40,399 Speaker 2: in China. That's a huge number. That's over half of 580 00:27:40,440 --> 00:27:43,680 Speaker 2: the global total expected to come online in twenty twenty six. 581 00:27:43,800 --> 00:27:47,320 Speaker 2: And again emphasizing China just wasn't really a big player 582 00:27:47,400 --> 00:27:50,439 Speaker 2: up until recently. So you're seeing the early signs of 583 00:27:50,720 --> 00:27:54,040 Speaker 2: a infrastructure build out, a policy support potentially coming in 584 00:27:54,119 --> 00:27:57,000 Speaker 2: really quickly, like in the next twelve weeks, and then 585 00:27:57,320 --> 00:28:01,240 Speaker 2: a concentrated aviation market that's pretty much ran by the government. 586 00:28:01,480 --> 00:28:04,440 Speaker 2: So that could change the whole landscape. It would change flows, 587 00:28:04,520 --> 00:28:06,800 Speaker 2: it would change feedstock flows, and it would change a boit. 588 00:28:06,840 --> 00:28:09,760 Speaker 2: I suppose the way we perceive sustainable aviation fuel, right. 589 00:28:10,600 --> 00:28:12,840 Speaker 1: I suppose that, you know, because whenever China moves into 590 00:28:12,840 --> 00:28:14,600 Speaker 1: an area, you know, the rest of the world has 591 00:28:14,640 --> 00:28:16,520 Speaker 1: to take No, it's either a great opportunity or a 592 00:28:16,560 --> 00:28:18,679 Speaker 1: great threat, or maybe a little bit of both. So 593 00:28:19,119 --> 00:28:23,080 Speaker 1: the sustainable aviation fuel, it seems, then, moves are to 594 00:28:23,119 --> 00:28:25,840 Speaker 1: supply this emerging domestic demand which is going to be 595 00:28:25,840 --> 00:28:28,280 Speaker 1: created by policy provisions for the rest of the world. 596 00:28:28,320 --> 00:28:30,679 Speaker 1: That might mean not they're not being as much of 597 00:28:30,680 --> 00:28:34,160 Speaker 1: this used cooking oil as a feedstock anymore, which would 598 00:28:34,160 --> 00:28:36,800 Speaker 1: presumably push up global prices. You know, how do you 599 00:28:36,840 --> 00:28:40,720 Speaker 1: see it playing out? Does China become an amazing market 600 00:28:41,080 --> 00:28:44,320 Speaker 1: for sustainable aviation fuel or does it become like it 601 00:28:44,360 --> 00:28:46,920 Speaker 1: has in so many other areas that the dominant supplier 602 00:28:47,160 --> 00:28:48,720 Speaker 1: in this in a global industry. 603 00:28:49,080 --> 00:28:53,240 Speaker 2: Yeah, it could. The sustainable aviation fuel market is incredibly bizarre. 604 00:28:53,360 --> 00:28:56,280 Speaker 2: Think about it like this. The US is vegan, right, 605 00:28:56,840 --> 00:29:01,080 Speaker 2: Europe is presitarian, and China is kind of a You 606 00:29:01,120 --> 00:29:03,440 Speaker 2: can make a cake that's gluten free, you can make 607 00:29:03,480 --> 00:29:06,640 Speaker 2: a cake that has let's say milk in it, or 608 00:29:06,880 --> 00:29:09,520 Speaker 2: you know, bacon on top, whatever, and then you can 609 00:29:09,520 --> 00:29:12,440 Speaker 2: have a cake in China that's just laced with steaks 610 00:29:12,480 --> 00:29:15,160 Speaker 2: on top whatever, right, Right, that is a weird cake. 611 00:29:15,240 --> 00:29:17,440 Speaker 2: There's a weird cake. But the ingredients that go into 612 00:29:17,480 --> 00:29:19,240 Speaker 2: it to find the product that come out of it, 613 00:29:19,280 --> 00:29:24,200 Speaker 2: and not every market recognizes the product based on the 614 00:29:24,240 --> 00:29:25,160 Speaker 2: stuff that goes into it. 615 00:29:25,240 --> 00:29:25,360 Speaker 3: Right. 616 00:29:25,400 --> 00:29:27,840 Speaker 2: The vegan's not going to eat the cake that's made 617 00:29:27,840 --> 00:29:30,920 Speaker 2: with eggs, right. So this is any aleviation fuel. Some 618 00:29:30,960 --> 00:29:35,160 Speaker 2: markets will take ethanol, for example, as an input, or 619 00:29:35,600 --> 00:29:37,640 Speaker 2: soybean oil for example, that you'd get here in the 620 00:29:37,760 --> 00:29:42,320 Speaker 2: US that might not be recognized as a saf in Europe, right, 621 00:29:42,360 --> 00:29:45,520 Speaker 2: But the ingredients really define the product that comes out. 622 00:29:45,680 --> 00:29:48,120 Speaker 2: In Europe. You're not allow allowed you certain types of 623 00:29:48,160 --> 00:29:50,280 Speaker 2: palm oil, for example, which you might source as a 624 00:29:50,320 --> 00:29:52,760 Speaker 2: feedstock in Asia, which is normally not a problem if 625 00:29:52,760 --> 00:29:55,000 Speaker 2: you're driving a car, right because you're probably not going 626 00:29:55,040 --> 00:29:57,600 Speaker 2: to drive the car to China. If you're flying an airplane, though, 627 00:29:57,680 --> 00:30:00,000 Speaker 2: you might take off in London and land in Beijing 628 00:30:00,240 --> 00:30:04,280 Speaker 2: or vice versa, and one of those jurisdictions might recognize 629 00:30:04,280 --> 00:30:06,760 Speaker 2: that you're using sustainable aviation fuel, whereas the other one 630 00:30:06,840 --> 00:30:09,320 Speaker 2: might not. Right, It's a really weird market, so yeah, 631 00:30:09,360 --> 00:30:12,680 Speaker 2: they might become the leader in specific types. It might 632 00:30:12,720 --> 00:30:15,600 Speaker 2: not become the leader in all of the types. Right. 633 00:30:15,960 --> 00:30:17,040 Speaker 2: That makes sense. 634 00:30:16,960 --> 00:30:20,640 Speaker 1: Because it's fundamentally a market that is created out of policy. 635 00:30:22,680 --> 00:30:24,840 Speaker 2: Out of policy. Yeah, and the policy is different in 636 00:30:24,920 --> 00:30:27,760 Speaker 2: all of the large markets, which is the patchwork of confusion. 637 00:30:27,800 --> 00:30:31,000 Speaker 1: I guess yeah, like it' very it can be very fragmented. 638 00:30:31,320 --> 00:30:35,160 Speaker 2: It really depends on what the consuming market will allow 639 00:30:35,360 --> 00:30:38,400 Speaker 2: be registered as consumption. Right, because all these airlines are 640 00:30:38,440 --> 00:30:40,960 Speaker 2: in theory paying premium for this product. So if they're 641 00:30:40,960 --> 00:30:43,360 Speaker 2: going to pay premium, they wanted to count towards the 642 00:30:43,440 --> 00:30:45,280 Speaker 2: regulation in the market they're flying it in. 643 00:30:45,360 --> 00:30:48,360 Speaker 1: It's maybe not as simple as you know, China is 644 00:30:48,400 --> 00:30:50,960 Speaker 1: going to just move on and dominate, but it certainly 645 00:30:51,000 --> 00:30:54,200 Speaker 1: is the case that if these policies are put in place, 646 00:30:54,480 --> 00:30:56,720 Speaker 1: it will shake things up in the industry globally. 647 00:30:56,880 --> 00:30:59,680 Speaker 2: It will absolutely shake things up. The really interesting part 648 00:30:59,720 --> 00:31:02,040 Speaker 2: is if it's not enough let's say, use cooking oil 649 00:31:02,080 --> 00:31:05,520 Speaker 2: to produce sustainable aviation fuels a sort of traditional way 650 00:31:05,560 --> 00:31:08,560 Speaker 2: if you want to call it, through hydro processing, like 651 00:31:08,600 --> 00:31:12,160 Speaker 2: through refinery. If they then start to develop these new 652 00:31:12,200 --> 00:31:15,880 Speaker 2: technologies to create let's say, e fuels, then those can 653 00:31:15,920 --> 00:31:19,120 Speaker 2: scale and they're really pretty I would say universal if 654 00:31:19,200 --> 00:31:23,000 Speaker 2: you make it from clean power hydrogen carbon, make sustainable 655 00:31:23,000 --> 00:31:26,600 Speaker 2: aviation fuel from it. Europe recognize that, the US recognizes 656 00:31:26,640 --> 00:31:29,720 Speaker 2: that it's not as dependent on the feedstock. And that 657 00:31:29,840 --> 00:31:31,840 Speaker 2: is where I think the tipping point could come. If 658 00:31:31,920 --> 00:31:35,120 Speaker 2: China doesn't have enough to supply itself with this used 659 00:31:35,120 --> 00:31:38,080 Speaker 2: cooking oil technology, and then the new technologies could really 660 00:31:38,120 --> 00:31:41,000 Speaker 2: start to turn into the solar panels, the next solar 661 00:31:41,000 --> 00:31:43,360 Speaker 2: panels of the world. They could export that. That would 662 00:31:43,400 --> 00:31:44,880 Speaker 2: be a technology that was scale. 663 00:31:45,080 --> 00:31:47,160 Speaker 1: So I suppose on that front we need to just 664 00:31:47,200 --> 00:31:48,040 Speaker 1: watch this space. 665 00:31:48,680 --> 00:31:51,400 Speaker 2: Yeah, but March twenty twenty six might be the month 666 00:31:51,480 --> 00:31:52,960 Speaker 2: to watch if I was going to watch any money. 667 00:31:53,040 --> 00:31:55,240 Speaker 1: Yeah, Okay, that's that's really interesting. Put that in your 668 00:31:55,280 --> 00:31:58,840 Speaker 1: diaries if you're at all interested in biofuels. Could be 669 00:31:58,840 --> 00:32:01,880 Speaker 1: a defining month. So we've talked about a few tipping points. Today. 670 00:32:02,120 --> 00:32:05,680 Speaker 1: You identified a tipping point around copper, So what is that, 671 00:32:05,800 --> 00:32:07,800 Speaker 1: what's going on there and does it fit into any 672 00:32:07,840 --> 00:32:10,280 Speaker 1: of the types of tipping point that we're seeing for 673 00:32:10,320 --> 00:32:11,200 Speaker 1: the other commodities. 674 00:32:11,520 --> 00:32:13,600 Speaker 2: Yeah, it's a really interesting one because it's a market 675 00:32:13,640 --> 00:32:16,880 Speaker 2: that's gone from fairly balanced slightly in surplus. We think 676 00:32:16,920 --> 00:32:19,080 Speaker 2: that twenty twenty six we'll see it go into a 677 00:32:19,160 --> 00:32:22,440 Speaker 2: deficit and a sustained deficit. And that is kind of 678 00:32:22,760 --> 00:32:25,280 Speaker 2: different point to the other commodities we spoke about today, 679 00:32:25,400 --> 00:32:29,000 Speaker 2: But it's one that's really driven by transition, yeah, which 680 00:32:29,040 --> 00:32:31,400 Speaker 2: makes it, I suppose, just different to the other ones 681 00:32:31,440 --> 00:32:33,600 Speaker 2: we talked about, which are a bit more fundamentally driven 682 00:32:33,640 --> 00:32:35,000 Speaker 2: potentially their words. 683 00:32:35,000 --> 00:32:36,680 Speaker 1: Shoot, I mean, if I was to try and like 684 00:32:36,800 --> 00:32:40,880 Speaker 1: force a narrative onto this, a lot of the traditional commodities, 685 00:32:41,240 --> 00:32:45,000 Speaker 1: you know, fossil fuels surplus, and then you know the 686 00:32:45,120 --> 00:32:48,080 Speaker 1: transition commodity was in short supply. I know that's too simple, 687 00:32:48,320 --> 00:32:50,520 Speaker 1: but you know there's maybe something symbolic about that. 688 00:32:50,680 --> 00:32:52,880 Speaker 2: Very different sized markets as well. I think that's a 689 00:32:52,920 --> 00:32:55,320 Speaker 2: big thing to take from this. As a small pond, 690 00:32:55,720 --> 00:32:58,240 Speaker 2: big fish, it is key for everything, right, and we've 691 00:32:58,240 --> 00:33:01,400 Speaker 2: seen this big build out of day centers that's impacting 692 00:33:01,520 --> 00:33:04,160 Speaker 2: power across the world. It's impacting gas across the world, 693 00:33:04,160 --> 00:33:07,200 Speaker 2: it's impacting coal even across the world. Right. Obviously a 694 00:33:07,280 --> 00:33:10,520 Speaker 2: key ingredient in building a data centers the wires, right, 695 00:33:10,640 --> 00:33:12,640 Speaker 2: So there's a huge amount of copper that goes into 696 00:33:12,680 --> 00:33:15,560 Speaker 2: these which is driving a shortfall that's already been driven 697 00:33:15,600 --> 00:33:19,280 Speaker 2: by delayed minds coming on sanctions and tariffs around the world. 698 00:33:19,440 --> 00:33:22,320 Speaker 2: Things like EV's taking off, which again use a lot 699 00:33:22,400 --> 00:33:25,840 Speaker 2: of copper, great infrastructure copper. It goes on and it 700 00:33:25,880 --> 00:33:28,000 Speaker 2: goes on all those offshore wind farms. They've got to 701 00:33:28,000 --> 00:33:30,520 Speaker 2: get power back to land somehow. So there's just tons 702 00:33:30,520 --> 00:33:33,240 Speaker 2: and tons and tons quite literally of copper going into 703 00:33:33,280 --> 00:33:37,000 Speaker 2: this transition. And it's a delicately balanced market, i would say, 704 00:33:37,040 --> 00:33:39,680 Speaker 2: and it takes a long time for new supply to 705 00:33:39,720 --> 00:33:42,480 Speaker 2: come online. You could be looking at for a greenfield 706 00:33:42,520 --> 00:33:45,520 Speaker 2: project in a really mining friendly country maybe ten to 707 00:33:45,520 --> 00:33:48,440 Speaker 2: twelve years. So we're already really behind if we think 708 00:33:48,480 --> 00:33:51,160 Speaker 2: about any of those forecasts or projections that you see 709 00:33:51,160 --> 00:33:53,920 Speaker 2: around wind build out or EV take up or data 710 00:33:53,920 --> 00:33:56,680 Speaker 2: center uptake or miles behind. And even if you want 711 00:33:56,680 --> 00:33:59,280 Speaker 2: to just expand a brown field or an existing mine, 712 00:33:59,520 --> 00:34:01,720 Speaker 2: could be five to seven years by the time you 713 00:34:01,760 --> 00:34:03,800 Speaker 2: get the right policies in place and the permis that 714 00:34:03,840 --> 00:34:05,800 Speaker 2: you need in order to get that out of the ground. 715 00:34:05,960 --> 00:34:08,080 Speaker 2: The problem there is then that goes up in price, 716 00:34:08,200 --> 00:34:10,839 Speaker 2: right because there's a shortage, and that could slow down 717 00:34:10,880 --> 00:34:14,480 Speaker 2: other technologies developing, or you'd need to find a replacement. Right. 718 00:34:14,880 --> 00:34:17,719 Speaker 1: Interesting. I mean, if we were to use the high 719 00:34:17,760 --> 00:34:22,040 Speaker 1: school movie analogy, Copper is like that kid that nobody 720 00:34:22,040 --> 00:34:24,560 Speaker 1: ever noticed, and then all of a sudden they're in 721 00:34:24,640 --> 00:34:26,880 Speaker 1: high demand and everyone wants a piece of them. But 722 00:34:27,040 --> 00:34:29,040 Speaker 1: they need to make sure they play their cards right, 723 00:34:29,120 --> 00:34:31,880 Speaker 1: because the world might decide, oh, you know, copper is 724 00:34:32,400 --> 00:34:34,919 Speaker 1: too difficult to work with, we'll move on. We'll find 725 00:34:34,920 --> 00:34:38,000 Speaker 1: something else. But if copper rides this wave, it could 726 00:34:38,360 --> 00:34:40,080 Speaker 1: be suddenly the coolest kid in school. 727 00:34:40,320 --> 00:34:45,040 Speaker 2: Yeah. I think that's a fairly fair assessment. If not 728 00:34:45,080 --> 00:34:48,440 Speaker 2: a mean girls are into it, well, let's take it. 729 00:34:48,440 --> 00:34:50,840 Speaker 2: It's just an interesting market. We've also seen a bunch 730 00:34:50,880 --> 00:34:53,920 Speaker 2: of external factors impacting the price over the past few 731 00:34:53,960 --> 00:34:57,160 Speaker 2: months with sanctions and just how the market's price it's 732 00:34:57,200 --> 00:35:02,440 Speaker 2: really old, old school. It's assessed via warehouses and specific locations. 733 00:35:02,480 --> 00:35:05,440 Speaker 2: So we see sanctions last year or tarist from the 734 00:35:05,440 --> 00:35:09,360 Speaker 2: Trump administration leading to a ton of copper being imported 735 00:35:09,360 --> 00:35:11,399 Speaker 2: into the US, and then the rest of the world, 736 00:35:11,400 --> 00:35:13,879 Speaker 2: where a lot of those pricing warehouses are more than 737 00:35:14,400 --> 00:35:17,080 Speaker 2: in the US have a shortage. The price spikes, even 738 00:35:17,120 --> 00:35:20,400 Speaker 2: though actually supply demand, it's probably fine. It's just about balance, right, 739 00:35:20,560 --> 00:35:23,480 Speaker 2: So it's a quirky market and we've seen lots of disruptions, right, so, 740 00:35:23,640 --> 00:35:25,320 Speaker 2: but it is the one to watch, is what everybody's 741 00:35:25,320 --> 00:35:28,080 Speaker 2: paying attention to. You've seen a lot of news headlines 742 00:35:28,080 --> 00:35:30,799 Speaker 2: over the past few months, so yeah, let's see twenty 743 00:35:30,880 --> 00:35:32,880 Speaker 2: twenty six will be interesting because it'll be the first 744 00:35:32,920 --> 00:35:35,480 Speaker 2: shortage and it's a key ingredient and a lot of 745 00:35:35,480 --> 00:35:37,839 Speaker 2: these exciting things that we talk about. 746 00:35:37,920 --> 00:35:41,839 Speaker 1: Right Well, Enriquez, this has been fascinating, and I mean 747 00:35:41,880 --> 00:35:45,200 Speaker 1: you're you weren't wrong. There's a lot of tipping points 748 00:35:45,239 --> 00:35:49,200 Speaker 1: happening in these various different commodities in twenty twenty six, 749 00:35:49,280 --> 00:35:50,799 Speaker 1: So there's going to be a lotle to watch. So 750 00:35:50,880 --> 00:35:53,640 Speaker 1: thank you for joining and framing this all today. David, 751 00:35:53,680 --> 00:35:56,839 Speaker 1: thank you for being here. Thank you, and Enrique, thank 752 00:35:56,920 --> 00:35:57,920 Speaker 1: you for being here as well. 753 00:35:58,040 --> 00:35:59,960 Speaker 3: Yes, thank you. 754 00:36:07,480 --> 00:36:10,600 Speaker 2: Today's episode of Switched On was produced by Cam Gray 755 00:36:10,800 --> 00:36:13,200 Speaker 2: with production assistance from Kamala Shelling. 756 00:36:13,360 --> 00:36:16,560 Speaker 1: Bloomberg NEIF is a service provided by Bloomberg Finance LP 757 00:36:16,719 --> 00:36:19,720 Speaker 1: and its affiliates. This recording does not constitute, nor should 758 00:36:19,719 --> 00:36:22,920 Speaker 1: it be construed as investment a vice investment recommendations, or 759 00:36:22,960 --> 00:36:25,800 Speaker 1: a recommendation as to an investment or other strategy. 760 00:36:25,800 --> 00:36:29,239 Speaker 2: Bloomberg ANIF should not be considered as information sufficient upon 761 00:36:29,280 --> 00:36:31,000 Speaker 2: which to base an investment decision. 762 00:36:31,080 --> 00:36:34,080 Speaker 1: Neither Bloomberg Finance LP nor any of its affiliates makes 763 00:36:34,080 --> 00:36:37,839 Speaker 1: any representation or warranty as to the accuracy or completeness 764 00:36:37,840 --> 00:36:39,120 Speaker 1: of the information contained in 765 00:36:39,120 --> 00:36:41,680 Speaker 2: This recording, and any liability as a result of this 766 00:36:41,760 --> 00:36:43,560 Speaker 2: recording is expressly disclaimed