Jeff Currie on tech bubbles and a once-in-a-lifetime chance for energy bulls

This transcript has been automatically generated and may contain errors or inaccuracies. It is provided for reference only and should not be considered a fully accurate record of the conversation.

Amrita

Jeff. Welcome back.

Jeff

Great to be back.

Amrita

Summer holidays are over, I think.

Amrita

Hello everyone! I'm super excited that we've got Jeff Curry with us as a guest author. Hopefully this is going to be the first of many that we get to, sit down, talk about issues and, you know, converse, going forward. Everybody knows who Jeff is. I don't think. Jeff, you need an introduction. Jeff, was synonymous with commodities, and Goldman Sachs for decades.

Amrita

But I do think it's worth talking about what you're doing now, which is you're chief strategy officer at Energy Pathways at Carlyle. So before we dive into the meat of, you know, commodity markets, which is your bread and butter, tell me a little bit about what's this new role?

Jeff

Great. Well, thank you, Amrita. It's an absolute it's a pleasure to be here. And, you know, I've admired your work over the decades, from some point when we were adversaries between Goldman and Barclays and well over a decade ago. So it's an honor and a privilege to be here. What am I doing in my new role?

Jeff

At Carlyle. You know, let's start with the energy transition. You know, I like to point out is, you know, it's nothing short of chaotic and disorganized. And one of the key reasons for that is the focus only on green at the expense of brown. And why do we use the word energy pathways? Because ultimately it's about those pathways between the brown and the green.

Jeff

And you've got to manage the winding down of the brown is still represents 82% of primary energy, still feeds 8 billion people and creates the pillars to modern society. Things like cement, plastic, steel, ammonia. So I our view here is to focus on both the brown and the green and the potential pathways between the two. And you know, the saying I'd like to say is, you cannot control the emissions unless you own the emissions.

Jeff

And so that's why we want to include Brown in the portfolio. And so that's really the focus of what we're trying to do.

Amrita

It's super exciting. It's funny because I was in Norway yesterday. Without naming names, but you can figure out who in Norway is called that many. But again, speaking at their board meeting and so on, I think there's a real that there is a genuine realization. Now about how you need to own the brown, and it's about decarbonizing that hydrocarbon chain rather than just saying it has to be all green.

Amrita

So I think it's, it is the right time for this, I guess, Carlisle, to kind of look into this because it's very nascent. But I can absolutely see the trend in the market going that way, that, okay, it's no longer about just the green. So. Yeah.

Jeff

Exactly. So exciting.

Amrita

Okay. But look, let's let me ask you the questions I'm sure everybody else wants me to ask you, which is, are you still bullish oil, given that everybody else is pretty bearish?

Jeff

Absolutely, yes. You know, but I think when we think about it on a on a longer term basis, yeah. It we've had some setbacks in Tokyo. Remember where in the shoulder months this is the weakest part for oil. But let's look at the rest of the commodity complex. It is telling you that this supercycle thesis is very much underway right now.

Jeff

And when we think about, commodities, you know, it still depends on what day you measure it, but it's up there with the top performing asset classes, across all the different financial markets. Because of the fact that you have an environment that cyclically supports commodities. But there's also that structural story. And I think everything that happened in copper that we saw last week is an indication of that story.

Jeff

You know, you think about the structural drivers of, of demand, you know, just kind of going back to our supercycle thesis, you know, the way we like, you know, to define it is redlining, oil demand already, redistribution policies, environmental policies and globalization. And copper is the poster child of that. You know, particularly look at what's driving copper more recently, you know, whether if it is green CapEx demand in China, green CapEx demand in the US, in Europe, which, by the way, that stimulus that impacts oil demand just takes a little bit longer.

Jeff

Then I demand, let's don't underestimate the you know, you're going to see a doubling in power generation demand. I don't think we'll get there, but they're going to do a lot of copper in the stimulus again, will stimulate oil demand. And the rest of the commodity complex. And let's don't underestimate the d the d globalization, military demand for, you know, commodities.

Jeff

So it's all there. I, you know, am I confident in the story? Absolutely. You know, we can talk about it later, but there's been some flies in the ointment. You know, one being actually the, you know, the dollar recycling is absent in this one. And then the other issue is, you know, we have a lot of oil creeping into the system from, you know, sanctioned oil is another one.

Jeff

So, but we can talk about those later. But I think the key message here is, yeah, I'm definitely still very much bullish on oil and the commodity complex. And, you know, the recent you know, the last couple of weeks have been a setback on one part of the commodity complex. But look at the metals that they in fact, the one thing we said at the beginning of this back in 2020, copper is the new oil.

Jeff

And that's where the focal point is. But let me remind everybody one thing that I learned in that 27.5 years at Goldman is when one market moves, it's unlikely the rest of them don't move.

Amrita

So I was going to ask you about that. I want to come back to the dollar recycling, because I think that's super important and not something people look at. And one of the things I've always admired about you is you've got such a global picture. Right? I think that's important. But let me ask you about copper. The pushback I'm getting when, you know, we've kind of talked about this, that is the worst of diesel demand declines behind us because industrial metals are kind of potentially pointing to that.

Amrita

But then the flip side is everybody's long copper. And that's why copper has gone up. It's actually not, a fundamental move.

Jeff

By the way. There is some truth to that. And that's the bizarre thing about this is, you know, we go back to, let's say, March. People were comfortably bullish oil, gold and copper. And you asked them what was their number one out of that? Three, it was invariably copper. The fundamental story wasn't there yet. Oil on the other hand, the fundamental story was there.

Jeff

It is still there. Yeah. You cannot sell oil if you were to give it away yet, people will take copper. Copper is a longer term story. We have seen a build in inventory in China that people are concerned about. And we sold off by what, what, 3 or 4% the other day because of that concern. But we're back up again this morning.

Jeff

In contrast, we look at oil. Oil is back. Where did the inventories are low. We have seen an inadequate build this year. So but it shows you that that sentiment and that momentum that is in copper is continue to push it forward while in oil you don't see it there. Well, I just want to make a couple comments about copper that are important for for oil is there's a lot of concern about the property market in China, obviously, and recent concerns about, you know, diesel demand and in oil.

Jeff

So in terms of thinking about, the, you know, the demand coming out out of China is what China has done, is replaced its property market as a driver of growth with green CapEx, you know, whether if it is in EVs, solar panels or lithium batteries, there's been a big focus there. It's taking time to readjust that.

Jeff

And that's part of the weakness we saw in 2022, in 2023, as they're making that transition out of property and into, green manufacturing. When we think about green manufacturing, it's less diesel intensive than the property market. So that's one thing to keep in mind. But then you have the knock on effects of the stimulus that this green manufacturing is going to create to the rest of the economy.

Jeff

Once that begins to take hold, it becomes much more positive, for diesel. And when we think about the, the medium term outlook, we see that manufacturing has likely bottomed everywhere in the world, including Europe, which will help reinforce diesel. And I think the one thing with diesel in metals demand, because they're both showing, or at least with metals demand in manufacturing are underscoring this rebound.

Jeff

The weakness that we're seeing in diesel is also being compounded supply from, you know, like renewable diesel or biodiesel, just new refining capacity. Refining capacity. Exactly. And there's I think people are underestimating the potential rebound there. Also, let's not forget it was really warm in one Q, which, you know, you know, I like to remind people decent diesel and heating oil are essentially the same thing.

Jeff

And so there's some, weakness, head headwinds there that, we think are more temporary.

Amrita

Yeah, I, I will I echo this because, you know, we just got back from China and we've got a big China team as well. And they've highlighted both on the macro side and on the commodity side, that there has been a bit of a delay in some of the stimulus right. Coming through, especially Q1. It was expected, but I think the government ended up spending too much time in the details it hasn't hit.

Amrita

And to your point, it's a there's a lag. Yeah. Right. So usually it's metals and then but but but you know taking a step back because you you raised this briefly as well. You've you you've been in Goldman for 27 years and then and now you're, you've got this new position in college. Why do you think oil in some ways is hated so much?

Amrita

Because my struggle is I, I don't disagree with anything you're saying on a medium term level. I get the short term. We've built some inventories, but some people are just not excited by oil, whether it be OPEC's spare capacity, be it or shale production is going to grow forever. Do you sense that there's just been a little bit, I guess maybe because Russia just we just never lost the barrels.

Amrita

People have not made a lot of money. Yeah. It just seems like like you said in March, everybody was still willing to go after copper and not after oil.

Jeff

But even when they were willing to go after it, like we saw in March, the enthusiasm was a fraction of what it would have been 5 or 10 years ago. And I think it goes really at the core, the terminal value within the energy equities. People do not see a long term story here. It's there is no growth story.

Jeff

It's a it's a terminal value of nothing with a wind down, forward outlook. And as long as that remains the case, it's going to be unlikely that investors are going to embrace this market. But the reality of it is demand is charging ahead this year above trend. It, you know, 1.3 to 1.5 million barrels a day. Off the back of very, very strong growth.

Jeff

Yeah. It was part due to the recovery from Covid and 21, 22 and 23. But I think the key message here is there's no indication that longer term growth story is still not there. I don't want to get into the political debate about whether that's right or wrong, but I think the key message here is there's no indication when we look at this on a global basis, that oil demand is really beginning to slow down, even, you know, with the penetration of EVs around the world.

Jeff

By the way, the one thing about diesel demand that there has been penetration is LNG, trucks in, in China. So they're I'm not going to say there is not penetration. But the bottom line is we're going through a very rapid global growth, underlying economic growth environment, oil demand is being pushed further even with these drags of like LNG at trucking.

Jeff

And you're above trend. And but it's that unwillingness to see the forward while we take copper. Yeah. We're not backward at it. It's not that you know, we have inventory. It's not, you know, super tight on the front end, but we're willing to buy the copper story because we see the long term benefits, but we don't see it in oil.

Jeff

I think that that's the key reason.

Amrita

I think that's a very good point. And in some ways goes back to what we were talking about, your kind of your new position at Carlyle. And hopefully this is the start. Right? Because I think more and more people are coming around to this idea that oil and gas will stay here for much longer than expected. But yeah, people need to put the money where their kind of thinking is.

Amrita

Right. And the EV story, I would say from China as well, you know, every single Chinese major had, gasoline demand in China peaking in the last year. This year, every single one of them is saying to us now, oh, guess what? Now you're starting to see not just EVs, it's hybrid cars that sales are going up because of long distance driving.

Amrita

And gasoline demand is surprising to the upside. So everybody's now starting to push back for gasoline demand. So yes. And to your point LNG trucking I know Goldman put out something around that. But I think their numbers, we've got only 300,000 barrels per day of displacement. I think I've heard numbers of up to seven, 800,000. So our number is lower for the LNG trucking.

Amrita

But again, it's almost even with these headwinds we are still growing at, you know, 1.2, 1.3, whatever that number is. Demand barrels a million barrels per day. So imagine, the kind of core demand growth that is out there. It's just somehow I feel that messaging has been lost over the past few years, and it's just gone back to peak oil demand, peak oil demand.

Amrita

And yet it never appears. Yeah.

Jeff

It doesn't ma'am. You know the question. Will it appear? Yeah. I like to go back historically, what's different about our approach to environmental policy today versus, let's say, the war on acid rain in the 70s and 80s is that in the 70s and 80s, policy use sticks, i.e. taxes and some type of penalty for consuming the product that you didn't want people to consume.

Jeff

And then you had the carrots with the subsidies. So far, the approach thus far has been all carrots, no sticks, and we wonder why we're not seeing oil demand, contract or, you know, burning carbon and releasing it is outside of a few places in like Europe and California. The sticks i.e. taxes and some type of, you know, cap and trade approach has not been applied on a, on a widespread basis.

Jeff

And, I like to point out we have the tools to solve this problem. We all learned it in econ 101A negative externality. You hit it with a tax. And I like to point out we took a market failure, meaning the inability to price carbon and have now turned it into a government failure, but the inability to levy a carbon price or a carbon tax.

Jeff

And.

Amrita

That is a.

Jeff

Solution, right? That is a solution. So until we get to that point, which we have all learned in econ 101, how to do and how to implement, and we've done it historically on a very successful basis. Till we get to that point, I'm very dubious of the ability to see demand really begin to a contract.

Amrita

I think the problem is we all live in democracies and everybody wants to get reelected. So these issues become very you know, you don't necessarily get reelected if you say energy transition is going to be expensive, that's the bad.

Jeff

Yep. And by the way, when we look at the disinflation that occurred over the last, let's say 18 months, there's a couple points to to keep in mind here is one, it happened globally and was very much synchronized. Two, it occurred against the backdrop of record commodity demand, like oil demand and against very strong GDP growth in the US and China.

Jeff

So was it demand driven? Absolutely not that interest rates cause it. Well, if it wasn't demand driven it could not have been interest interest rates because interest rates do not create supply. So it had to be new supply. Where do we get the supply. Because this point about the willingness of Western politicians to pay for their politics, they were unwilling to push against the sanctions on Russia, Iran and Venezuela.

Jeff

You know, I did a calculation the other day looking at the US approved $95 billion in aid to Ukraine and Israel. But the turning a blind eye to the sanctions was funding Russia, Iran and Venezuela, another $90 billion like every six months. So, you know, I'm not talking out of two sides of their head, but it goes to the point.

Jeff

Unwilling to pay for the politics. The other area environmental policy. You look at China, India and Indonesia, the run up in coal production and consumption was the size of Saudi Arabia. And we wonder why this backs up gas and power all around the world. And also turning a blind eye to deforestation in Latin America for soybeans, cutting down the mangroves in Philippines, for more palm oil.

Jeff

So, you know, if it's not creating supply through, you know, turning a blind eye to environmental issues, you know, even here in the UK, we saw them back away and then the third point is in immigration where so you got more food, you got more energy and you got more people, which is the more supply that created the disinflation.

Jeff

But none of this is sustainable.

Amrita

But but you know, my challenge for this year, we think it's a very bullish Q3, Q2, we've now had the sell off. I think we should be around the bottom here. I don't know what you're thinking. I think we rally in Q3. The challenge I have for kind of recommending, yes, we are going to really go is we have US elections and I think you're going to see them exactly like you said, do anything and everything in their powers, including another SPR release for whatever grounds.

Amrita

That's it's also become, I think, government policy or, you know, in the past geopolitics. We should we we used to always think of it as bullish. Now politics has almost also become very bearish, precisely because no sanctions policy has actually been designed to keep oil out of the market. And if anything, you've got more and more SPR.

Jeff

Yep, absolutely. But you look at what drives voters, you know, on the on the scoring, I can't remember what the what the magnitudes represent, but economy inflation get a score of something like 25 or 30. Foreign policy gets like three, climate change gets two. So they talk a big game on climate change in foreign policy, but particularly to the average U.S voter, it doesn't matter.

Jeff

All that matters is the price of gasoline at the pump. And and with that kind of backdrop, yes, they're going to fight the increases in, in, oil prices. But I'm also the part of the reason why people like to like copper is they go, well, the governments don't care.

Amrita

Exactly. This is this is my worry. But but do you think then oil goes to 100 this year, or probably not this year.

Jeff

But by the way, the one thing is you get a shortage and and you have to clear the market, the ability for this market to pop above $100 a barrel. When we were seeing 92 just a few weeks ago, I don't know why people struggle with this. Again. My 27.5 years at Goldman, the one thing I absolutely learned always on the wings.

Jeff

The market radically underestimates the upside and the downside. I mean, that's all we ever did at Goldman. They're they're going, okay, this thing's going down. It's not going to stop at 45. It's going to go to 25. And if it's going up, it's not going to stop at 90. It's going to go all the way up to 100, 120 and then turn around and come crashing back down.

Jeff

It's the third most volatile of all the commodities behind power, natural gas and then and then oil. So yeah, you mean the ability for those thing to spike up over a hundred I think is is very material. And also when we think about what is a commodity supercycle, it is a sequence of price spikes. It's not this steady no low vol rise in prices.

Jeff

It's you know, the average price rises over time, but the spikes are very large and very violent.

Amrita

But then what do you say to people who say, if we go above 100, OPEC's just going to come and flood the market? I mean, I have my views on that, but what do you reckon.

Jeff

They do, by the way? I like to point this out. With all due respect for the current management, because I do think they could actually OPEC management could actually do this correctly, but there is no history. No, there is no evidence in history going back to 1960 that the in the second half of the business cycle, OPEC has ever brought on supply to be able to tame the price spike going into the latter parts of the business cycle.

Jeff

And if they miss by five days, by five days, they have a problem. Why? Because think about, a refinery sitting in, Rotterdam and, I've got, let's say three days of inventory sitting in my takes. That ship is five days away. It doesn't help me. I got two days. I got a cover. And you're going to bid up the price and you're going to create extreme backwardation in these markets.

Jeff

And that's ultimately the point here. So unless they're months early, which is very unlikely, they're going to be that early. It's unlikely they're going to bring that oil on in time. And again I'm going to go back to every business cycle since 1960, since the creation of OPEC, they have never done it. Think about what in these business cycles, every time it's a price spike in oil and they had the spare capacity to tame it.

Jeff

Yet they couldn't they couldn't bring it on in time.

Amrita

And especially now with the motto very much being we are cautious. We're going to actually look at, you know, all the noise that's coming through and also a big focus of theirs. Rightly so. Is this whole spot right? How much more SVR do you get if that? If you do get that, then why should we bring barrels back right.

Amrita

It's just becoming more and more political.

Jeff

And by the way, it's not in their interest to be early. Why why do we want to flood the market, create a big inventory bit.

Amrita

Like why is that the bit I don't understand a lot of our clients. We had an event here and they're like, look at the balances in Q3. It's the right time for OPEC to bring barrels back. I said, but the decision is on the first and 2nd of June, which is before what if we're all wrong just as an example.

Amrita

Right. And then why would they bring barrels back. And let's say we have this massive flood of inventory. Then they need to court again to manage that. I think somehow people miss that bit about the OPEC logic I find, which is which is fascinating. But let's go back to the dollar, because the point you are making is much more kind of global, right?

Amrita

In terms of this is a in terms of the kind of global financial system as well. Why do you think the recycling hasn't happened this this time around?

Jeff

I think it starts with Russia. You know, me ask you if you're if you're a China and you're earning a lot of dollars right now. Trade is flourishing there long, an enormous number of dollars. Are you going to buy US treasuries with everything you've seen over the last 24 months? Probably. Probably not. And we're not seeing those dollars flowing back into US treasuries, and instead they're going out and buying things like gold.

Jeff

And it's important. Let's let's go over what that, that dollar recycling story would do to oil and commodity prices. That you would see that let's say Saudi Arabia or China, where, where earned dollars in one of these bull markets. They would take those dollars, put them into U.S. treasuries. That makes U.S rates go down. The dollar begins to weaken.

Jeff

A weaker dollar reinforces reflation, the higher reflation, and more dollars generated in China and Saudi Arabia would create a credit multiplier outside of the U.S. And so you'd have more dollars to invest in and consume things. And so it was a virtuous cycle in this dollar recycling because the dollars would replenish themselves, grow outside of the United States and create more external demand, which then more stronger growth in China and Saudi Arabia and places like that would weaken the dollar.

Jeff

And so it was that virtuous cycle, and it was particularly important for metals less important for oil, but more important for metals. And to think that we're sitting here today, you know, we saw an $80 a barrel a few weeks ago and we saw, you know, $11,000 a ton copper in the context of a dollar as strong as we have right now, you kind of be ask yourself, what would these markets be looking like if the dollar had weakened?

Jeff

Like it normally would over this environment? So if they're not buying U.S. treasuries, what are they by? Physical goods? In fact, the announcement this morning China wants to build a strategic reserve of cobalt. Yeah. And they're buying things like copper. They're buying gold. And in particularly gold, gold is the market that is the most out of whack here.

Jeff

When you look at gold prices relative to real interest rates or the dollar, it's historically diverged at unprecedented levels. Who's buying it? It's China, and it's primarily Russia and other. Iraq would be another big buyer of gold. And we don't know what the numbers in Iran, I would assume they're big buyers over there as well. But what they're doing is they're replacing the dollar, recycling, with gold recycling.

Jeff

And, you know, are we I'm not going to go I'm not a gold bug and want to get into the implications of it, but it's telling you that the world's changing and we're going in a very different path. You know, I don't know how to handicap oil and commodities for the lack of dollar recycling. But the reason why I'm not going to say it's bearish is because eventually, if they're moving into building strategic stockpiles of cobalt, physical commodities, physical commodity demand.

Amrita

Yeah, I mean, they're also, from what I've heard, when we were there, they're also going to do about 60 million barrels of crude SVR. I don't think that's out in the market, but imagine 60 million barrels of crude spro in the second half of the year when we are supposed to be tight. Could absolutely to kind of get crude going now, they should be price sensitive.

Amrita

So it's not a given that they'll do it at $9,100. But you never know right. Again. China's the other side of OPEC. They're also slow. Once they start going then they almost become price insensitive. Right. If they decided on the strategic reserves. But you know, what I find fascinating in what you're saying is it leads me to the question we get asked all the time.

Amrita

Do you think oil moves away from the dollar? Like, do you think you basically get essentially oil no longer denominated in the dollar.

Jeff

For moving that direction? I mean, if you look at the transactions between many of the Bric countries and, you know, the external, I call the Em space, a lot of this has already been priced in local currency. A lot of the Indian oil that's being sold was traded in INR and not in USD anymore. Now, does that matter to markets?

Jeff

Absolutely not. You know, I like to point out the FX markets between London, New York, it's like $5 trillion a day. The oil market is a pimple on that. Yeah. No, it doesn't do anything. You know, and I don't, you know, in for commodities, it's a currency illusion. It's because it's the relative price of the commodities relative to the rest of your basket that actually matters here.

Jeff

So, I don't have my answer to that. Every time I get asked. That is, it's a currency illusion. It doesn't matter. The only way it would matter is if the oil market could impact the FX market. But oil's not big enough. Yeah.

Amrita

No, I, I completely agree with you. In which case, see, going forward, we're pretty much first half of the year is done. If you were recommending trades, which I know in your current position you don't directly do, but you know, put put that hat on what would be your top picks and you can go not just, commodities.

Amrita

You can go any asset class for that matter.

Jeff

I love commodities. And at this point in the business cycle. And let's go over a couple things that that that are apparent here is the one model that we've been using since the 90s called them was this whole idea of a mid-cycle pause is that once you see the rate hikes in the higher energy hit the economy, it goes through this period of consolidation to the higher interest rates.

Jeff

A higher commodity prices. And then you come out of the second half of that in the latter part of the business cycle. And that's when you really want to own commodities. That's what we saw at the beginning in 2024. And it's playing out in a textbook fashion. It's just happening at higher interest rate levels. And I think people had had thought, thought about the past.

Jeff

So this is the time you want to own the physical goods and your best performing asset classes year to date when you stack them up, or Bitcoin, which is a physical good as well as, you know, gold and income. I was one point on on Bitcoin and gold like to point out the rise in the gold market cap this year is larger than the entire market cap of Bitcoin.

Jeff

Gold is the bigger, more established one, but it's the the physical goods are the ones you want to own here. Now which one of the physical goods do we like the most? And I think I'm a consensus view three or, you know, 4 or 5 weeks ago was gold. Copper and, and, oil. And I still stick with that, though, the ones that have.

Jeff

And by the way, oil is the one that's backward dated. It's the one that's giving you the cheapest. It's the cheap. You can't give it away. I mean, you look at its investor positioning, you know, it's running at, you know, 14% right now. It's ridiculously low. But I want to go over another point here that people are getting worried about when they see it is that as you go into the second half of the business cycle, what happens is the growth rate slow, but the levels continue to grow.

Jeff

And one thing I've been pounding the table on for two and a half decades is for commodities. It's the level of demand that matters, not the growth rate of demand. As long as that level of demand is above the supply, which we know has to be the case, you did not get an inventory build. Again, the fundamentals in oil are better than copper.

Jeff

There is no inventory built. Well, there's a very small one. I think you're estimates at 33 million barrels. Which tells you the level of demand is above the level of supply. The forward curve tells you the level of demand is above the level of supply. And we're going to see the macro data slowdown. And if you still have pricing pressures and if the fed is inability where it can't cut, and if anything it has to raise rates.

Jeff

And I don't want to get into the, you know, the discussion around that, you know, the impact it will have on the financial markets will be very negative. But the physical goods that depend upon the levels, remember, one way you can think about it, financial markets are driven by expectations. Expectations are driven by growth rates. Commodities, they are spot assets and they're driven by the levels.

Jeff

That's why you get the outperformance of the commodities relative to financial. So this thing's playing out textbook case. And I don't see it being any different as we go into the maturity of the business cycle, which means you want to own, commodities. In which commodities do you want to own here? I'm going to say, you know, oil, copper and gold.

Jeff

And, I may be out on a limb, but I will tell you if I'm a, you know, if I knew nothing about the sentiment in these markets and looked at the fundamentals, I want to own oil. Out of those three.

Amrita

I couldn't agree more. I was going to ask you about the fed rate since you said, let's not go there. We will not go there because we want you to come back. Oh, let's let's continue this discussion. So thank you, Jeff, so much. And I will say to all our clients who've, who are going to listen to this, send us your feedback, send us questions.

Amrita

Hopefully we can convince Jeff to kind of come and do this on a regular basis. If you want to send in questions, we'll we'll kind of, you know, try and answer those as well. And we'll get Jeff, some hard questions next time. This this was too easy for you. Say yes.

Jeff

But it's a pleasure to be here. And thanks for inviting me.

Amrita

No, thank you so much. And, Yeah, thanks for listening, everyone.

Amrita

Hello everyone! I'm super excited that we've got Jeff Curry with us as a guest author. Hopefully this is going to be the first of many that we get to, sit down, talk about issues and, you know, converse, going forward. Everybody knows who Jeff is. I don't think. Jeff, you need an introduction. Jeff, was synonymous with commodities, and Goldman Sachs for decades.

Amrita

But I do think it's worth talking about what you're doing now, which is you're chief strategy officer at Energy Pathways at Carlyle. So before we dive into the meat of, you know, commodity markets, which is your bread and butter, tell me a little bit about what's this new role?

Jeff

Great. Well, thank you, Amrita. It's an absolute it's a pleasure to be here. And, you know, I've admired your work over the decades, from some point when we were adversaries between Goldman and Barclays and well over a decade ago. So it's an honor and a privilege to be here. What am I doing in my new role?

Jeff

At Carlyle. You know, let's start with the energy transition. You know, I like to point out is, you know, it's nothing short of chaotic and disorganized. And one of the key reasons for that is the focus only on green at the expense of brown. And why do we use the word energy pathways? Because ultimately it's about those pathways between the brown and the green.

Jeff

And you've got to manage the winding down of the brown is still represents 82% of primary energy, still feeds 8 billion people and creates the pillars to modern society. Things like cement, plastic, steel, ammonia. So I our view here is to focus on both the brown and the green and the potential pathways between the two. And you know, the saying I'd like to say is, you cannot control the emissions unless you own the emissions.

Jeff

And so that's why we want to include Brown in the portfolio. And so that's really the focus of what we're trying to do.

Amrita

It's super exciting. It's funny because I was in Norway yesterday. Without naming names, but you can figure out who in Norway is called that many. But again, speaking at their board meeting and so on, I think there's a real that there is a genuine realization. Now about how you need to own the brown, and it's about decarbonizing that hydrocarbon chain rather than just saying it has to be all green.

Amrita

So I think it's, it is the right time for this, I guess, Carlisle, to kind of look into this because it's very nascent. But I can absolutely see the trend in the market going that way, that, okay, it's no longer about just the green. So. Yeah.

Jeff

Exactly. So exciting.

Amrita

Okay. But look, let's let me ask you the questions I'm sure everybody else wants me to ask you, which is, are you still bullish oil, given that everybody else is pretty bearish?

Jeff

Absolutely, yes. You know, but I think when we think about it on a on a longer term basis, yeah. It we've had some setbacks in Tokyo. Remember where in the shoulder months this is the weakest part for oil. But let's look at the rest of the commodity complex. It is telling you that this supercycle thesis is very much underway right now.

Jeff

And when we think about, commodities, you know, it still depends on what day you measure it, but it's up there with the top performing asset classes, across all the different financial markets. Because of the fact that you have an environment that cyclically supports commodities. But there's also that structural story. And I think everything that happened in copper that we saw last week is an indication of that story.

Jeff

You know, you think about the structural drivers of, of demand, you know, just kind of going back to our supercycle thesis, you know, the way we like, you know, to define it is redlining, oil demand already, redistribution policies, environmental policies and globalization. And copper is the poster child of that. You know, particularly look at what's driving copper more recently, you know, whether if it is green CapEx demand in China, green CapEx demand in the US, in Europe, which, by the way, that stimulus that impacts oil demand just takes a little bit longer.

Jeff

Then I demand, let's don't underestimate the you know, you're going to see a doubling in power generation demand. I don't think we'll get there, but they're going to do a lot of copper in the stimulus again, will stimulate oil demand. And the rest of the commodity complex. And let's don't underestimate the d the d globalization, military demand for, you know, commodities.

Jeff

So it's all there. I, you know, am I confident in the story? Absolutely. You know, we can talk about it later, but there's been some flies in the ointment. You know, one being actually the, you know, the dollar recycling is absent in this one. And then the other issue is, you know, we have a lot of oil creeping into the system from, you know, sanctioned oil is another one.

Jeff

So, but we can talk about those later. But I think the key message here is, yeah, I'm definitely still very much bullish on oil and the commodity complex. And, you know, the recent you know, the last couple of weeks have been a setback on one part of the commodity complex. But look at the metals that they in fact, the one thing we said at the beginning of this back in 2020, copper is the new oil.

Jeff

And that's where the focal point is. But let me remind everybody one thing that I learned in that 27.5 years at Goldman is when one market moves, it's unlikely the rest of them don't move.

Amrita

So I was going to ask you about that. I want to come back to the dollar recycling, because I think that's super important and not something people look at. And one of the things I've always admired about you is you've got such a global picture. Right? I think that's important. But let me ask you about copper. The pushback I'm getting when, you know, we've kind of talked about this, that is the worst of diesel demand declines behind us because industrial metals are kind of potentially pointing to that.

Amrita

But then the flip side is everybody's long copper. And that's why copper has gone up. It's actually not, a fundamental move.

Jeff

By the way. There is some truth to that. And that's the bizarre thing about this is, you know, we go back to, let's say, March. People were comfortably bullish oil, gold and copper. And you asked them what was their number one out of that? Three, it was invariably copper. The fundamental story wasn't there yet. Oil on the other hand, the fundamental story was there.

Jeff

It is still there. Yeah. You cannot sell oil if you were to give it away yet, people will take copper. Copper is a longer term story. We have seen a build in inventory in China that people are concerned about. And we sold off by what, what, 3 or 4% the other day because of that concern. But we're back up again this morning.

Jeff

In contrast, we look at oil. Oil is back. Where did the inventories are low. We have seen an inadequate build this year. So but it shows you that that sentiment and that momentum that is in copper is continue to push it forward while in oil you don't see it there. Well, I just want to make a couple comments about copper that are important for for oil is there's a lot of concern about the property market in China, obviously, and recent concerns about, you know, diesel demand and in oil.

Jeff

So in terms of thinking about, the, you know, the demand coming out out of China is what China has done, is replaced its property market as a driver of growth with green CapEx, you know, whether if it is in EVs, solar panels or lithium batteries, there's been a big focus there. It's taking time to readjust that.

Jeff

And that's part of the weakness we saw in 2022, in 2023, as they're making that transition out of property and into, green manufacturing. When we think about green manufacturing, it's less diesel intensive than the property market. So that's one thing to keep in mind. But then you have the knock on effects of the stimulus that this green manufacturing is going to create to the rest of the economy.

Jeff

Once that begins to take hold, it becomes much more positive, for diesel. And when we think about the, the medium term outlook, we see that manufacturing has likely bottomed everywhere in the world, including Europe, which will help reinforce diesel. And I think the one thing with diesel in metals demand, because they're both showing, or at least with metals demand in manufacturing are underscoring this rebound.

Jeff

The weakness that we're seeing in diesel is also being compounded supply from, you know, like renewable diesel or biodiesel, just new refining capacity. Refining capacity. Exactly. And there's I think people are underestimating the potential rebound there. Also, let's not forget it was really warm in one Q, which, you know, you know, I like to remind people decent diesel and heating oil are essentially the same thing.

Jeff

And so there's some, weakness, head headwinds there that, we think are more temporary.

Amrita

Yeah, I, I will I echo this because, you know, we just got back from China and we've got a big China team as well. And they've highlighted both on the macro side and on the commodity side, that there has been a bit of a delay in some of the stimulus right. Coming through, especially Q1. It was expected, but I think the government ended up spending too much time in the details it hasn't hit.

Amrita

And to your point, it's a there's a lag. Yeah. Right. So usually it's metals and then but but but you know taking a step back because you you raised this briefly as well. You've you you've been in Goldman for 27 years and then and now you're, you've got this new position in college. Why do you think oil in some ways is hated so much?

Amrita

Because my struggle is I, I don't disagree with anything you're saying on a medium term level. I get the short term. We've built some inventories, but some people are just not excited by oil, whether it be OPEC's spare capacity, be it or shale production is going to grow forever. Do you sense that there's just been a little bit, I guess maybe because Russia just we just never lost the barrels.

Amrita

People have not made a lot of money. Yeah. It just seems like like you said in March, everybody was still willing to go after copper and not after oil.

Jeff

But even when they were willing to go after it, like we saw in March, the enthusiasm was a fraction of what it would have been 5 or 10 years ago. And I think it goes really at the core, the terminal value within the energy equities. People do not see a long term story here. It's there is no growth story.

Jeff

It's a it's a terminal value of nothing with a wind down, forward outlook. And as long as that remains the case, it's going to be unlikely that investors are going to embrace this market. But the reality of it is demand is charging ahead this year above trend. It, you know, 1.3 to 1.5 million barrels a day. Off the back of very, very strong growth.

Jeff

Yeah. It was part due to the recovery from Covid and 21, 22 and 23. But I think the key message here is there's no indication that longer term growth story is still not there. I don't want to get into the political debate about whether that's right or wrong, but I think the key message here is there's no indication when we look at this on a global basis, that oil demand is really beginning to slow down, even, you know, with the penetration of EVs around the world.

Jeff

By the way, the one thing about diesel demand that there has been penetration is LNG, trucks in, in China. So they're I'm not going to say there is not penetration. But the bottom line is we're going through a very rapid global growth, underlying economic growth environment, oil demand is being pushed further even with these drags of like LNG at trucking.

Jeff

And you're above trend. And but it's that unwillingness to see the forward while we take copper. Yeah. We're not backward at it. It's not that you know, we have inventory. It's not, you know, super tight on the front end, but we're willing to buy the copper story because we see the long term benefits, but we don't see it in oil.

Jeff

I think that that's the key reason.

Amrita

I think that's a very good point. And in some ways goes back to what we were talking about, your kind of your new position at Carlyle. And hopefully this is the start. Right? Because I think more and more people are coming around to this idea that oil and gas will stay here for much longer than expected. But yeah, people need to put the money where their kind of thinking is.

Amrita

Right. And the EV story, I would say from China as well, you know, every single Chinese major had, gasoline demand in China peaking in the last year. This year, every single one of them is saying to us now, oh, guess what? Now you're starting to see not just EVs, it's hybrid cars that sales are going up because of long distance driving.

Amrita

And gasoline demand is surprising to the upside. So everybody's now starting to push back for gasoline demand. So yes. And to your point LNG trucking I know Goldman put out something around that. But I think their numbers, we've got only 300,000 barrels per day of displacement. I think I've heard numbers of up to seven, 800,000. So our number is lower for the LNG trucking.

Amrita

But again, it's almost even with these headwinds we are still growing at, you know, 1.2, 1.3, whatever that number is. Demand barrels a million barrels per day. So imagine, the kind of core demand growth that is out there. It's just somehow I feel that messaging has been lost over the past few years, and it's just gone back to peak oil demand, peak oil demand.

Amrita

And yet it never appears. Yeah.

Jeff

It doesn't ma'am. You know the question. Will it appear? Yeah. I like to go back historically, what's different about our approach to environmental policy today versus, let's say, the war on acid rain in the 70s and 80s is that in the 70s and 80s, policy use sticks, i.e. taxes and some type of penalty for consuming the product that you didn't want people to consume.

Jeff

And then you had the carrots with the subsidies. So far, the approach thus far has been all carrots, no sticks, and we wonder why we're not seeing oil demand, contract or, you know, burning carbon and releasing it is outside of a few places in like Europe and California. The sticks i.e. taxes and some type of, you know, cap and trade approach has not been applied on a, on a widespread basis.

Jeff

And, I like to point out we have the tools to solve this problem. We all learned it in econ 101A negative externality. You hit it with a tax. And I like to point out we took a market failure, meaning the inability to price carbon and have now turned it into a government failure, but the inability to levy a carbon price or a carbon tax.

Jeff

And.

Amrita

That is a.

Jeff

Solution, right? That is a solution. So until we get to that point, which we have all learned in econ 101, how to do and how to implement, and we've done it historically on a very successful basis. Till we get to that point, I'm very dubious of the ability to see demand really begin to a contract.

Amrita

I think the problem is we all live in democracies and everybody wants to get reelected. So these issues become very you know, you don't necessarily get reelected if you say energy transition is going to be expensive, that's the bad.

Jeff

Yep. And by the way, when we look at the disinflation that occurred over the last, let's say 18 months, there's a couple points to to keep in mind here is one, it happened globally and was very much synchronized. Two, it occurred against the backdrop of record commodity demand, like oil demand and against very strong GDP growth in the US and China.

Jeff

So was it demand driven? Absolutely not that interest rates cause it. Well, if it wasn't demand driven it could not have been interest interest rates because interest rates do not create supply. So it had to be new supply. Where do we get the supply. Because this point about the willingness of Western politicians to pay for their politics, they were unwilling to push against the sanctions on Russia, Iran and Venezuela.

Jeff

You know, I did a calculation the other day looking at the US approved $95 billion in aid to Ukraine and Israel. But the turning a blind eye to the sanctions was funding Russia, Iran and Venezuela, another $90 billion like every six months. So, you know, I'm not talking out of two sides of their head, but it goes to the point.

Jeff

Unwilling to pay for the politics. The other area environmental policy. You look at China, India and Indonesia, the run up in coal production and consumption was the size of Saudi Arabia. And we wonder why this backs up gas and power all around the world. And also turning a blind eye to deforestation in Latin America for soybeans, cutting down the mangroves in Philippines, for more palm oil.

Jeff

So, you know, if it's not creating supply through, you know, turning a blind eye to environmental issues, you know, even here in the UK, we saw them back away and then the third point is in immigration where so you got more food, you got more energy and you got more people, which is the more supply that created the disinflation.

Jeff

But none of this is sustainable.

Amrita

But but you know, my challenge for this year, we think it's a very bullish Q3, Q2, we've now had the sell off. I think we should be around the bottom here. I don't know what you're thinking. I think we rally in Q3. The challenge I have for kind of recommending, yes, we are going to really go is we have US elections and I think you're going to see them exactly like you said, do anything and everything in their powers, including another SPR release for whatever grounds.

Amrita

That's it's also become, I think, government policy or, you know, in the past geopolitics. We should we we used to always think of it as bullish. Now politics has almost also become very bearish, precisely because no sanctions policy has actually been designed to keep oil out of the market. And if anything, you've got more and more SPR.

Jeff

Yep, absolutely. But you look at what drives voters, you know, on the on the scoring, I can't remember what the what the magnitudes represent, but economy inflation get a score of something like 25 or 30. Foreign policy gets like three, climate change gets two. So they talk a big game on climate change in foreign policy, but particularly to the average U.S voter, it doesn't matter.

Jeff

All that matters is the price of gasoline at the pump. And and with that kind of backdrop, yes, they're going to fight the increases in, in, oil prices. But I'm also the part of the reason why people like to like copper is they go, well, the governments don't care.

Amrita

Exactly. This is this is my worry. But but do you think then oil goes to 100 this year, or probably not this year.

Jeff

But by the way, the one thing is you get a shortage and and you have to clear the market, the ability for this market to pop above $100 a barrel. When we were seeing 92 just a few weeks ago, I don't know why people struggle with this. Again. My 27.5 years at Goldman, the one thing I absolutely learned always on the wings.

Jeff

The market radically underestimates the upside and the downside. I mean, that's all we ever did at Goldman. They're they're going, okay, this thing's going down. It's not going to stop at 45. It's going to go to 25. And if it's going up, it's not going to stop at 90. It's going to go all the way up to 100, 120 and then turn around and come crashing back down.

Jeff

It's the third most volatile of all the commodities behind power, natural gas and then and then oil. So yeah, you mean the ability for those thing to spike up over a hundred I think is is very material. And also when we think about what is a commodity supercycle, it is a sequence of price spikes. It's not this steady no low vol rise in prices.

Jeff

It's you know, the average price rises over time, but the spikes are very large and very violent.

Amrita

But then what do you say to people who say, if we go above 100, OPEC's just going to come and flood the market? I mean, I have my views on that, but what do you reckon.

Jeff

They do, by the way? I like to point this out. With all due respect for the current management, because I do think they could actually OPEC management could actually do this correctly, but there is no history. No, there is no evidence in history going back to 1960 that the in the second half of the business cycle, OPEC has ever brought on supply to be able to tame the price spike going into the latter parts of the business cycle.

Jeff

And if they miss by five days, by five days, they have a problem. Why? Because think about, a refinery sitting in, Rotterdam and, I've got, let's say three days of inventory sitting in my takes. That ship is five days away. It doesn't help me. I got two days. I got a cover. And you're going to bid up the price and you're going to create extreme backwardation in these markets.

Jeff

And that's ultimately the point here. So unless they're months early, which is very unlikely, they're going to be that early. It's unlikely they're going to bring that oil on in time. And again I'm going to go back to every business cycle since 1960, since the creation of OPEC, they have never done it. Think about what in these business cycles, every time it's a price spike in oil and they had the spare capacity to tame it.

Jeff

Yet they couldn't they couldn't bring it on in time.

Amrita

And especially now with the motto very much being we are cautious. We're going to actually look at, you know, all the noise that's coming through and also a big focus of theirs. Rightly so. Is this whole spot right? How much more SVR do you get if that? If you do get that, then why should we bring barrels back right.

Amrita

It's just becoming more and more political.

Jeff

And by the way, it's not in their interest to be early. Why why do we want to flood the market, create a big inventory bit.

Amrita

Like why is that the bit I don't understand a lot of our clients. We had an event here and they're like, look at the balances in Q3. It's the right time for OPEC to bring barrels back. I said, but the decision is on the first and 2nd of June, which is before what if we're all wrong just as an example.

Amrita

Right. And then why would they bring barrels back. And let's say we have this massive flood of inventory. Then they need to court again to manage that. I think somehow people miss that bit about the OPEC logic I find, which is which is fascinating. But let's go back to the dollar, because the point you are making is much more kind of global, right?

Amrita

In terms of this is a in terms of the kind of global financial system as well. Why do you think the recycling hasn't happened this this time around?

Jeff

I think it starts with Russia. You know, me ask you if you're if you're a China and you're earning a lot of dollars right now. Trade is flourishing there long, an enormous number of dollars. Are you going to buy US treasuries with everything you've seen over the last 24 months? Probably. Probably not. And we're not seeing those dollars flowing back into US treasuries, and instead they're going out and buying things like gold.

Jeff

And it's important. Let's let's go over what that, that dollar recycling story would do to oil and commodity prices. That you would see that let's say Saudi Arabia or China, where, where earned dollars in one of these bull markets. They would take those dollars, put them into U.S. treasuries. That makes U.S rates go down. The dollar begins to weaken.

Jeff

A weaker dollar reinforces reflation, the higher reflation, and more dollars generated in China and Saudi Arabia would create a credit multiplier outside of the U.S. And so you'd have more dollars to invest in and consume things. And so it was a virtuous cycle in this dollar recycling because the dollars would replenish themselves, grow outside of the United States and create more external demand, which then more stronger growth in China and Saudi Arabia and places like that would weaken the dollar.

Jeff

And so it was that virtuous cycle, and it was particularly important for metals less important for oil, but more important for metals. And to think that we're sitting here today, you know, we saw an $80 a barrel a few weeks ago and we saw, you know, $11,000 a ton copper in the context of a dollar as strong as we have right now, you kind of be ask yourself, what would these markets be looking like if the dollar had weakened?

Jeff

Like it normally would over this environment? So if they're not buying U.S. treasuries, what are they by? Physical goods? In fact, the announcement this morning China wants to build a strategic reserve of cobalt. Yeah. And they're buying things like copper. They're buying gold. And in particularly gold, gold is the market that is the most out of whack here.

Jeff

When you look at gold prices relative to real interest rates or the dollar, it's historically diverged at unprecedented levels. Who's buying it? It's China, and it's primarily Russia and other. Iraq would be another big buyer of gold. And we don't know what the numbers in Iran, I would assume they're big buyers over there as well. But what they're doing is they're replacing the dollar, recycling, with gold recycling.

Jeff

And, you know, are we I'm not going to go I'm not a gold bug and want to get into the implications of it, but it's telling you that the world's changing and we're going in a very different path. You know, I don't know how to handicap oil and commodities for the lack of dollar recycling. But the reason why I'm not going to say it's bearish is because eventually, if they're moving into building strategic stockpiles of cobalt, physical commodities, physical commodity demand.

Amrita

Yeah, I mean, they're also, from what I've heard, when we were there, they're also going to do about 60 million barrels of crude SVR. I don't think that's out in the market, but imagine 60 million barrels of crude spro in the second half of the year when we are supposed to be tight. Could absolutely to kind of get crude going now, they should be price sensitive.

Amrita

So it's not a given that they'll do it at $9,100. But you never know right. Again. China's the other side of OPEC. They're also slow. Once they start going then they almost become price insensitive. Right. If they decided on the strategic reserves. But you know, what I find fascinating in what you're saying is it leads me to the question we get asked all the time.

Amrita

Do you think oil moves away from the dollar? Like, do you think you basically get essentially oil no longer denominated in the dollar.

Jeff

For moving that direction? I mean, if you look at the transactions between many of the Bric countries and, you know, the external, I call the Em space, a lot of this has already been priced in local currency. A lot of the Indian oil that's being sold was traded in INR and not in USD anymore. Now, does that matter to markets?

Jeff

Absolutely not. You know, I like to point out the FX markets between London, New York, it's like $5 trillion a day. The oil market is a pimple on that. Yeah. No, it doesn't do anything. You know, and I don't, you know, in for commodities, it's a currency illusion. It's because it's the relative price of the commodities relative to the rest of your basket that actually matters here.

Jeff

So, I don't have my answer to that. Every time I get asked. That is, it's a currency illusion. It doesn't matter. The only way it would matter is if the oil market could impact the FX market. But oil's not big enough. Yeah.

Amrita

No, I, I completely agree with you. In which case, see, going forward, we're pretty much first half of the year is done. If you were recommending trades, which I know in your current position you don't directly do, but you know, put put that hat on what would be your top picks and you can go not just, commodities.

Amrita

You can go any asset class for that matter.

Jeff

I love commodities. And at this point in the business cycle. And let's go over a couple things that that that are apparent here is the one model that we've been using since the 90s called them was this whole idea of a mid-cycle pause is that once you see the rate hikes in the higher energy hit the economy, it goes through this period of consolidation to the higher interest rates.

Jeff

A higher commodity prices. And then you come out of the second half of that in the latter part of the business cycle. And that's when you really want to own commodities. That's what we saw at the beginning in 2024. And it's playing out in a textbook fashion. It's just happening at higher interest rate levels. And I think people had had thought, thought about the past.

Jeff

So this is the time you want to own the physical goods and your best performing asset classes year to date when you stack them up, or Bitcoin, which is a physical good as well as, you know, gold and income. I was one point on on Bitcoin and gold like to point out the rise in the gold market cap this year is larger than the entire market cap of Bitcoin.

Jeff

Gold is the bigger, more established one, but it's the the physical goods are the ones you want to own here. Now which one of the physical goods do we like the most? And I think I'm a consensus view three or, you know, 4 or 5 weeks ago was gold. Copper and, and, oil. And I still stick with that, though, the ones that have.

Jeff

And by the way, oil is the one that's backward dated. It's the one that's giving you the cheapest. It's the cheap. You can't give it away. I mean, you look at its investor positioning, you know, it's running at, you know, 14% right now. It's ridiculously low. But I want to go over another point here that people are getting worried about when they see it is that as you go into the second half of the business cycle, what happens is the growth rate slow, but the levels continue to grow.

Jeff

And one thing I've been pounding the table on for two and a half decades is for commodities. It's the level of demand that matters, not the growth rate of demand. As long as that level of demand is above the supply, which we know has to be the case, you did not get an inventory build. Again, the fundamentals in oil are better than copper.

Jeff

There is no inventory built. Well, there's a very small one. I think you're estimates at 33 million barrels. Which tells you the level of demand is above the level of supply. The forward curve tells you the level of demand is above the level of supply. And we're going to see the macro data slowdown. And if you still have pricing pressures and if the fed is inability where it can't cut, and if anything it has to raise rates.

Jeff

And I don't want to get into the, you know, the discussion around that, you know, the impact it will have on the financial markets will be very negative. But the physical goods that depend upon the levels, remember, one way you can think about it, financial markets are driven by expectations. Expectations are driven by growth rates. Commodities, they are spot assets and they're driven by the levels.

Jeff

That's why you get the outperformance of the commodities relative to financial. So this thing's playing out textbook case. And I don't see it being any different as we go into the maturity of the business cycle, which means you want to own, commodities. In which commodities do you want to own here? I'm going to say, you know, oil, copper and gold.

Jeff

And, I may be out on a limb, but I will tell you if I'm a, you know, if I knew nothing about the sentiment in these markets and looked at the fundamentals, I want to own oil. Out of those three.

Amrita

I couldn't agree more. I was going to ask you about the fed rate since you said, let's not go there. We will not go there because we want you to come back. Oh, let's let's continue this discussion. So thank you, Jeff, so much. And I will say to all our clients who've, who are going to listen to this, send us your feedback, send us questions.

Amrita

Hopefully we can convince Jeff to kind of come and do this on a regular basis. If you want to send in questions, we'll we'll kind of, you know, try and answer those as well. And we'll get Jeff, some hard questions next time. This this was too easy for you. Say yes.

Jeff

But it's a pleasure to be here. And thanks for inviting me.

Amrita

No, thank you so much. And, Yeah, thanks for listening, everyone.

Jeff

God, I.

Amrita

Don't think it felt like holidays, given everything that's going on. But still, lots to talk about. Let's we could start with. I mean, there's a lot, but we can we definitely need to touch upon the fact that the market continues to remain extremely bearish. Yet there are no signs in the physical market. And I just got back from Asia from OPEC.

Amrita

Everyone in the East is like, where is this glut? Where is the oil? Then of course, we've had the IEA recently released their report about how decline rates, which I know you've been talking about for a while, and I have been and we've been the only two people keep banging on about this. Actually, decline rates are higher than what they were initially thinking.

Amrita

We know spare capacity is OPEC's spare capacity is probably a bigger topic than the market realized because OPEC is increasing production quote unquote. But the exports aren't really showing up. Chinese SVR buying. And last but not the least, all the geopolitical tensions bubbling around Russia, Iran, Venezuela. I mean, there's a whole host of things to talk about.

Amrita

I think let's start with oil, right? I remember the last one we talked about in terms of the oil balances specifically. You kept saying that I just don't agree with this narrative, right, that I just don't see why this has to kind of collapse. And we've been saying in our research, we keep highlighting that, look, yes, the builds are material going forward if these OPEC volumes materialize, but these OPEC volumes haven't been coming.

Amrita

Right. Have you seen a change in the last few months with the summer lull that people have stepped back and been like, actually, the market continues to remain backward dated. The builds on showing up, I at least will say every single person I speak to is even more convicted that these builds are coming.

Jeff

Yeah, I and what I find so surprising is the level of conviction on something they have never seen, which is the spare capacity that's going to create that massive surplus. And there's no evidence of it. You know, I think I'm going to just give you the back, the back, the numbers you gave me last week, which I used on Bloomberg, recently was overall, OPEC production announcement.

Jeff

There are 2.5 million barrels per day increase. Exports are up 900,000 barrels a day. That is what we're missing. 1.6 million barrels per day of that 900, 5 to 600 of it. Saudi, 2 to 300 of it up and a smidgen from like Kuwait. That's core OPEC. Nobody else has increased production. And yeah, I think the saying of Warren Buffett, when the tide goes out, you find out who's swimming naked here.

Jeff

Swimming naked is not having spare capacity. And I think it's pretty clear Russia I mean Ukraine takes constant hits at Russia. You know, they be lucky. You know they're not increasing production. And if anything it's going to likely start going down. Us, you know, the unemployment rate in Texas is spiking. Was in the unemployment claims last week are down 3000 jobs in the oil patch.

Jeff

They're not increasing production. So right there you know, you look at your two largest oil producers, they're likely going to start declining because they're not investing. And I don't have to go to the rest of non-OPEC. So I really struggle. Where are these inventory builds going to come from? And, you know, the demand numbers were revised up 770,000 barrels per day.

Jeff

IEA says decline rates are setting in. The bottom line You look at this market even going back to 2022, it hasn't built inventories. It's remained backward dated. Demand is remaining far more robust than what anybody is thought and investments not there. So, you know, the evidence supports the bullish narrative. And the bearish narrative is based upon, you know, you know, assumptions that have never been tested.

Jeff

So I the part of it I just simply do not understand is why that conviction, I think why is the conviction because the price won't move. Why doesn't the price move if you're an investor and you haven't been invested in tech, you're in trouble. You are massively underweight. So the bottom line is people get longer and longer.

Jeff

Ten stocks, some of them are worth $4 trillion and they have to be longer. If they aren't long, they're in trouble and eventually they're going to be in trouble. And, you know, you look at since we last talked, I was really bullish on oil and all the other commodities and record highs on gold, copper just topped 10,000.

Jeff

What do I think is going to kill off the hyperscalers. It's going to be lack of investment in the grid and copper. And when they go down that's when you're going to want to be long oil. And the question is when do they hit a wall? You know, the survey showed 92% of the hyperscalers say what's their number one issue, why they can't hit their targets, access to grid.

Jeff

So I think we're going to get there. And I do think the physical world will take down the hyperscalers. And when you take them down, then you're going to get the rotation in back into our space. And oh my God, they're underweight. You know if I was bullish a year ago I mean so Mark much more bullish.

Jeff

And I don't think people have any fathom how high how high this is going to go. They have been declining reducing their positions now for two and a half three years. So right now you look at the S&P 500 Energy's 3% of the index. It's one of the most important industries out there. I mean it's yeah I think it's real estate and utilities.

Jeff

The only ones that are lower, like two and a half and even utilities are important. So we've you see that rotation occur. Investors are going to be scrambling for any exposure they possibly can get. So I you know, I think the the case is is overwhelmingly on the bullish side. And I always like to take the contrarian view, in a market that's particularly short right now.

Amrita

I think for me, what really stands out to your point is that conviction, even though it's been proven wrong for nine months, right. And yet, oh, it is coming. And it's so universal, this view. Right. That's what scares me. And I mean, again, you know, we know this very well that there is a reason why OPEC and particularly Prince Abdulaziz is so confident in terms of this unwind, because in some ways, you know, my interpretation of a lot of this, is that.

Amrita

Okay? Show me where the spare capacity is. Right. And I think he is going to be proven right significantly in terms of just how the rest of the players are kind of coming out without really having any barrels. And it then becomes and begs the question, you were at the heart of that 2004 two 2008 bull rally.

Amrita

You know, you were the one calling for those significant price increases at that point. I also feel a lot of people in today's market, they haven't they weren't there at that point. I feel old saying this, by the way. Yeah. I was just like, I was like, I just started my career around 2008. But I remember that and I was reading up a lot about that.

Amrita

And I think when I highlight the fact that, yes, we've come off $15 in a backward dated market, one of the steepest backwardation we've seen, and then people are like, oh, we're going to go into contango, and therefore the front's going to go down to $40. I'm like, if we get into contango, sure, Q1 balances do look weak.

Amrita

We can get into some physical contango. But the other thing is the back end of the curve is probably going to go bad, which is exactly what happened like two decades ago. And then the whole curve moves up. So you can be in a contango market, but a higher flat price.

Jeff

Yep. And I remember, you know, making that call in 2000, we were right for all the wrong reasons. It wasn't bullish. It was really.

Amrita

Bearish. It was really bearish.

Jeff

Yes in the back end and went up. I remember when it first started moving in 0405. We just went from 20 to like 35 and then 35 to 50. But here's the thing that I think that going back to why people have a conviction is the prices remain low and they don't know why. It's a lack of liquidity.

Jeff

Dollar super strong. This is identical to 2001-2002. And I remember right on the eve of of it was December 31st, 2001, going into 2002. And that's when China was admitted to the WTO. And that's when the game started. The dollar was trading 0.87 against the euro. Yeah. You had oil back rotated sitting at you know, something like I can't remember where it was.

Jeff

Actually, if it was 2001, it was probably somewhere around 18, $19 a barrel back rotated. And we were bullish based upon, you know, the China and all this other stuff. But the reality is then OPEC stepped on the accelerator, brought on that supply, flipped into contango, and then the back end and all liquidity on it drove it out.

Jeff

I think we're on the identically the same same position there.

Amrita

Which is why I wanted you to like almost tell the audience what happened then, because I genuinely think people don't remember. Okay.

Jeff

Oh one That February oh two, we published the piece The Revenge of the Old Economy, and we were making this simple observation just like now. And it was, you know, the, the, the new economy was, you know, it's was screaming going in, you know, toward the middle of oh, one, by the way, it was already cracked by the time you wrote that piece, but it was this same time.

Jeff

Yeah. We could sucked all the capital out of the world into all of those dot.com stocks that were, you know, them in Silicon Valley. And eventually, yeah, they didn't have the profits to maintain it. My way is identical today because instead of data centers it was broadband and telecom. Yeah it was a and everybody wanted Calpine actually was the darling like constellation is today and Vistra is today.

Jeff

So it was the exact same set up you wanted to own the power. The power is going to go into the internet. The internet's going to change the world. We want to own broadband. Why? We we're just now exhausting all that spare capacity that was built over that time period. And even Sam Altman is talking about, we're overbuilding this stuff, and you're going up pressure the system.

Jeff

But, you know, gas was the focus. And I think I was saying this last time I put on my gas, I didn't want to do oil. And I, you know.

Amrita

Now you've come back.

Jeff

Yeah, I'm coming back then. But I think, you know, the setup is identically the same. I don't know, this time if we do go into to contango because you got to go, but at least then you had a massive amount of spare capacity still in Saudi Arabia. And, you know, Iraq had come online, was able to come online that flipped you into that contango.

Jeff

And then the demand growth was the highest ever recorded in oh four. China went up like 3.1 or 2.2 million barrels per day, literally one year. And that's when OPEC brought it all online. And then you're out, by the way. Then the market got really bearish in 0607. And inventories built. And then you go into 0708. And you know I know Prince Abdulaziz.

Jeff

He was a deputy minister in 0708 Niamey was in they Niamey was shocked. He brought on all the spare capacity in 0708. And then the market proceeded to go up $50 a barrel, because it's a fine line between oil surplus and running out of capacity. I don't do the bounces anymore, like use I don't have a fine idea about.

Jeff

I'm not. I hear you on the the inventory builds, but we're into this and we still haven't seen the inventory builds. They revised demand up, revised supply down. We may be in a double whammy here. Where? Hey, you're out of spare capacity, you're out of inventory. And the other thing that makes this even more different than any other point in time is you always had some big producer that had sanctions on it.

Jeff

You don't have them anymore. Venezuela's in the market, Iran's in the market. Russia's in the market. Anything those three are going to go down. US is exhausted. It's SPR. So the insurance policies are out. China is the only one that's actually concerned about this building spares. They've got their insurance policy. They're ready to to rock and roll.

Jeff

The things get into it. But the West, you know, I don't understand what they have done. They've put themselves in a very precarious situation right now. You know, and I think that that's the one thing is different. So I hear you on the on the inventory building going up in a contango and we where we went down in the backwardation.

Jeff

But I think if there's anything why is the market wrong. And I think it's the same situation and no 1 or 2 is you had to be overweight the hyper scale. You have to be overweight tech right now are you got a problem. And everybody I talked to go, why don't you want to buy this stuff is because, yeah, I hear you, but it doesn't work.

Jeff

And if it doesn't work here, the other thing to I am really going to learn in my 30 years of doing this, nobody has to buy a financial product. They have to buy oil, they have to buy this. You can sit there and do the fundamentals all day long. Nobody's going to force you to buy this stuff, and you don't have to buy it until you're really underweight and you got a problem.

Jeff

So right now, if you're if you're not long tech, you got a problem. You're you're you're you're underperforming. If you're not long energy, you haven't had a problem for a decade.

Amrita

To why change.

Jeff

Why change. And they're not going to change until they have to.

Amrita

But I think so. No I agree I mean you could easily get a situation especially now, right. If Russia will lose more barrels or any of these countries, we won't get that contango because we'll just absorb it. But do you at least get the sense that that back end of the curve has to get a bit, because we've talked about spare capacity, probably what that's talking about non-OPEC supply, because we talked about this last time as well after 26, really from that mid 27 onwards, there isn't a project database of new supply.

Amrita

The bulk of and we have a great chart which I'll probably show at the conference in terms of how, much supply is coming online this year, because it's both OPEC and non-OPEC, but after that it's flat. Yep. Right. So in terms of your double whammy, it could be triple because then you ought to realize, hang on, there's no new incremental non-OPEC either right.

Jeff

Yep. There's nothing out there. There's there's no insurance policy.

Amrita

Right. And then let's talk about the IEA just released report about higher decline rates. Right. Like that's my worry that yes, we're focused on these builds are coming. But then just 12 to 18 months out you got a problem. Yeah.

Jeff

But but here's my question. Who's going to buy the back end.

Amrita

That's why I'm asking you. Like do we send some of these long term investors are starting to get interested or not even not yet.

Jeff

There's nobody left that knows anything about this to go out and and do this. You know, it's like so I mean, the reality is, and anybody who knows anything about oil, you know, the understands the cycles of it, they've all left. They've gone and done other things, just like, you know, now with the, you know, in the, in the oil patch, you get rid of all these, these drillers and hey, where are you going to find them.

Jeff

There's nobody left. You're going to have to retrain everybody. Bring him back and somebody who knows it. And most people who trade these markets, they don't know what. Oh they don't. You know, I'm like, you ain't seen nothing yet until you see what happens to this tech bubble when it burst. Even Sam Altman is like, God, it's a bubble.

Jeff

And I think the the people were shell shocked on Liberation Day. That market could go down that much that fast. Yeah. Okay. And I go, well, that's you know, you you lived through 0102I remember in Goldman walking around on those tech floors, they were vacant. And it was scary. And I don't think the world is ready for what is going to be in for.

Jeff

Because the only way you can go, hey, how am I going to buy that back in? You got to get you got to take down that tech story. And taking that tech story down is going to be a painful process in my away. Oil and commodities got they always get hit in this thing. So the the initial process is going to be violent.

Jeff

But then you know, the capital has to find a new home. It doesn't it's not it's not quite a zero sum game, but it's pretty close to it. So you're going to have all this capital going home. Where do we go next. And the obvious place to go is going to be energy. I just don't see find me another sector that's going to have attractive fundamentals.

Jeff

When tech ends its game here. And so when you move on to the next and by the way, I think, you know, copper mining, it's the whole space. It is the same revenge of the old economy story here. And but I think the it has to start with creating the investor that buy the back end. And right now the money's parked in tech and and by the way, it's rightfully parked in there.

Jeff

I don't know where it's going to. And my guess is, is they're going to keep missing their targets because of grid access or, or cost of copper and whatever it might be, Transformers. And eventually people go, this is not happening.

Amrita

It might be 12 months like, but in some ways it coincides perfectly with the most bullish part for oil, which is kind of a year or so out. Yeah, given the lack of spare capacity, lack of non-OPEC supplies. Yeah, but you're right. I think the initial bit might things might get worse first before it gets better. But I just worry that when things like when the liquidity comes the move off, it's just going to be exponential potentially.

Jeff

Oh I do I agree I, I think you know, I don't you know I was too bullish you know but I right now I don't think I've ever been this is a once in a lot generation type opportunity here because we have ignored the space. You know it's worse. And actually here's a stat like to say in 1999, 2000, as we went in there, we had a stat we would say is that US MPs destroyed $0.72 on every dollar.

Jeff

Excuse me, they destroyed $0.28 on every dollar. So they only they only could enter 72 on each dollars. What they earned this time around is they destroyed $0.54 on every dollar. So it's way worse than what we did in that 1990s. So you have less investment there. Oh, and the other thing I'd like to point out to the hyperscalers are doing identically the same thing is what the shield guys did when they destroyed all that money.

Jeff

They're spending money over there. At one point, the shale guys peaked out at 1.5 times earnings. And what they were spending way more the hyperscalers around 1.3 right now. So they're and it's just like you guys, we've seen this story again. It doesn't end very well. And so you know, they're spending and they keep funding and they create stories about why this makes sense.

Jeff

And then everybody tells me energy's a bad investment. We got killed in 2014. Yeah. They were spending 1.5 times earnings.

Amrita

Now they're not now.

Jeff

They're not so I think you know the setup here is far better than what it was in, in the 2000. Now the part that's missing is you don't have have China, having that big demand impetus. But then I go, okay, like I've talked before is all right. Europe has got to go out. And now, oh, we can talk Poland and Qatar and all that.

Jeff

The Europeans, they got to spend enormous amounts on defense, and it looks like they're going to do it. And that stuff requires a lot of commodity and energy energy infrastructure. And, you know, it's going to be a diversification of oil refining, you know, renewables, you know, it's everything nukes. And so I tend to think you're going to get, you know, a you got a, you got the makings of the big CapEx boom, like the 2000 with Europe sitting at the center.

Jeff

But I don't think you can ever be is as explosive you're not going to get I'm not going to say it won't happen, but you're not going to get a 3.4 million barrels per day demand increase. Like what you got in 2000.

Amrita

No, no. And I really think this is probably going to be even more supply driven. Yeah. Than demand driven. Right. Because of the confluence of factors. But your point good segue into the geopolitics, right? I mean, right now, like you said, Vince, in the market, Iran exporting anywhere between 1.5 to 1.7, Russia, they're exporting everything they can, right.

Amrita

They're only bound by OPEC plus quotas. And by the way, they're overachieving on that because they can't produce.

Jeff

Yeah, they can't produce.

Amrita

So this is also where I find and I will say the market is bearish, but probably not as short as it could be because people are just very worried that, okay, any of these geopolitical events could happen. But the volumes we're talking about are huge. That could be lost, right? Yeah. And even if you assume China continues to buy it, even right now, India and the US are in trade talks and they're saying you do need to reduce Russian imports.

Amrita

So where do you see all of this playing?

Jeff

I don't I don't see China or India reducing their Russian exports if anything actually this morning India is up observing Russian military equipment on the border and and so on the Ukrainian border, which is telling you that the Americans are pushing the Indians away. And when when you look at if you do take China and you do Russia, Iran and Venezuela, and you put those three together, China is is basically energy independent.

Jeff

So by creating these sanctioned entities that China is siphoning out, you, China, you're just making does China want this war to end? Absolutely not. Is us going to do anything to in these clearly they Poland, the Russia sent drones into Poland and and what was Trump's it looks like it accidentally. They're not going to do anything.

Jeff

And I don't think it's in anyone's interest to do anything besides Europe. Yeah. Europe's got a problem, which I. I'm going to go back. Europe is going to spend a lot of money on defense because they got to take matters into their own hands. You know, they've had 75 years to figure this out. And you know they're getting cut off.

Jeff

It's time to grow up and take care of yourself. And I think you're in Europe for talking to give you the idea that numbers I think I talked about last time, China was a $10 trillion investment boom between oh 2 in 2012. Put that in today's terms. It's, you know, 15 trillion. Worst case scenario, I'm going to put it in dollars is the, the, the European and military boom is 5 trillion on the bottom and potentially 14, 15 trillion on the top.

Jeff

So it's on the scale of China. If it you know, if they really did. And by the way, every day we go through this, it looks more and more like Europe's going to have to move closer to the 1415 trillion, it's €14 trillion. Kind of.

Amrita

What Trump wants, right? He's basically now saying if you do it I will join. Yeah. Yeah. I mean let's whether he does it or not, that's a different story. But that's kind of his ask.

Jeff

Yeah. And you know, I, you know, let's you know I, I'm not an expert on geopolitics here. But you know, you take that Monroe Doctrine in. He's sure acting like it's Monroe Doctrine now at stake. You know, deal with your own home and ignore what's happening in the rest of the world. And the fact that he's, you know, there's skirmishes going on in places like Venezuela and the Chinese are there, you know, is that something that that could flare up?

Jeff

But I think you're going to your point is, we're not going to wake up tomorrow and have all this Russian and Iranian oil. I don't know where that's going to come from. So again, I just don't know where the conviction your odds of waking up tomorrow morning with Russian oil, something happening there I think are much higher than mysteriously getting more oil.

Jeff

So I, I'm I'm baffled by how even the politics, the geopolitics are playing out because I think it just reinforces the upside.

Amrita

Especially now Ukraine is explicitly actually talking about the fact that this is the best way to damage Russian revenues. And they've been extremely successful this time around. 13 refinery attacks in August, five already in September. It's probably only going to go up.

Jeff

But I have a question for you. You know, Biden would call up Zelensky every time he you take a hit at one of those refineries. Stop it. And Trump is equally concerned about inflation through oil prices. Why isn't Trump calling them up and doing the same thing?

Amrita

I mean, the best thing I heard, yesterday and it's quite funny saying, oh, Trump must know Q4 balances are going to be very weak. And I did start laughing saying that I don't think Trump follows oil prices. That was the no. But I, I, I get the sense an audible team have been kind of saying that there is he Trump definitely wants some form of a deal, right?

Amrita

He likes the big headlines. He doesn't really want to sanction Russia because I think he just doesn't believe it's going to work. Yeah. But at the same time, he probably has given Zelenskyy a bit of free rein. One of the things is if or like crude prices were to start going up, because we've still been extremely rangebound, right.

Amrita

We've still between 65 and 74. Brant and yes, again, diesel is going up, gasoline is going up. And I don't think that's necessarily on Trump's radar. I have a feeling if crude jumped $10 he would probably make that call. Right, right, right now, which we'd still pretty like for him. Remember it just not that long ago. He said $64 WTI is a good price.

Jeff

Yeah for.

Amrita

Whatever reason. And kind of there right. Yeah. So I think that's why he hasn't picked up the phone. I think if prices went up say Brant towards AT&T above 75 he probably would make that call. Yeah. Also a big part of what he's driving now at is we need to cut rates.

Jeff

By the way, on the on the damage that, that Ukraine has done to Russia. You know, JP JPMorgan put it that like 500,000 and another one put it at, you know, it's, you know, something like 1.5. Where do you put the damage on on the refining right now.

Amrita

Capacity is more it's like 1.5 etc.. But the actual loss in runs is about a million barrels per day, give or take. Now, obviously some are coming back as they've been. The damage is limited. Some damages are much bigger. I think for me the biggest thing the market is missing. And to state the obvious, Russia is actually a really big country.

Amrita

The transit times take long. So a lot of people were like, oh, refineries were hit. Oh, we're not seeing it. We're not seeing it. And our, products team are about to put out something tomorrow that the monthly additional space. And there's a chart in there that shows this month tracking the lowest diesel exports out of Russia in over five years.

Jeff

Wow. Wow.

Amrita

So I think that's the issue because so much of the oil or whether it be crude, whether it be diesel, is already in the pipeline, in transit or on rail cars in transit. So there is a good one month lag between when the refineries are getting hit and all conversations. One of the very interesting revelations is some of these refineries can't even reroute this crude.

Amrita

They just have to shut in. Yes. So I genuinely think the worst is about to happen.

Jeff

That now I'm right there with with you on that, by the way, on the point about, you know, Trump knowing where the balance is. One thing that I spend a lot of time now with people who are not close to the market, but I used to be like you, talking to everybody that close is you can take people that trade commodities and that are in they really they all they hear about is surplus and they really think it's shale like the common view is shale is yes.

Jeff

There's screaming increase. You know, things to you know, our friend Harvey Blah is talking about all of that increase coming. I think what you have a consensus view out there that shale is the savior. And I bet even Trump believes that. And I think because the vast majority of your average investor is under the view, there's a huge surplus that's coming and it's going to be driven by US shale.

Jeff

That is the non non specialist.

Amrita

View.

Jeff

Narrative.

Amrita

But do you think then the IEA report which they finally say okay decline rates are you know 8% instead of 3%. Does that change the narrative.

Jeff

Because it's too it's just the word decline rates too difficult for a non-specialist to even absorb. They don't they don't understand it. And it's two. So that report went well you know viral in our world. Yeah. But to anybody outside of us yeah it's just nobody nobody paid attention. And they nobody will pay attention until the price moves.

Jeff

Yeah. It goes back to that point. The one thing I have learned in all this is we can be as bullish as you want.

Amrita

But the price has to do.

Jeff

The price has to do the work. And then people go, oh something's going on. Yeah. And and so at this point right now, yeah, I mean you look at the key, how you, it's costing you every day if you aren't long.

Amrita

So, good segue. We've got our conference coming up 29 30th of September.

Jeff

Looking forward to it.

Amrita

You're going to be there. You're one of our key speakers. And, we've got quite a few CEOs coming, not just from majors, but the shale patch. And I've been having conversations with them in the lead up to it, you know, talking about what we're going to talk about. And they are amazed. They see the same thing. They just saying, we don't understand how people think we're going to squeeze any more out of this.

Amrita

We are doing what we can and they're like $65. WTI is just not good enough anymore. So I think we hear a lot from them. We've got, you know, the deputy Energy secretary coming from the US as well. So that'll be an interesting one in terms of seeing, what what that headline, kind of, talks he wants to give.

Amrita

But yeah, I mean, we've got some OPEC, ministers and, and we'll see. I think it just kind of ends up being the timing will be super crucial because it's still a little like a few, even a few days these days with what's going on in Russia, can really, really change that dynamic. Yeah.

Jeff

I actually I'm not a I know you say the fundamental balance is starts to shift. You know, it's close to next year. But the reality is that once this market moves and people, some fear gets in this saying, this thing's going to move and move quickly, it'll always move well before what we think you know, and I think you start seeing Russia get really tight.

Jeff

And, you know, I there's closet walls out there. They call me, they go, you know, I need to have some I need some string to get long. This thing. Yeah. By the way, I would be, you know, I'm personally. Because then I can trade this stuff. Now I'm long. I'm there. So like, your could your cost benefit ratio right now with being long versus being.

Amrita

Short all these levels.

Jeff

Is, is. Yeah. It's just we know you're digging into the cost curve Employment's going down in Texas right now. Your your risk reward. Just back up the track. You know buy this stuff. And you know buy it back in, buy anything you can get your hands on. Because the other thing too, whether if it's the companies or the, the markets themselves, there's just not enough capacity for the, for the financial markets once they go, hey, I need some exposure to this stuff, but there's nothing there.

Amrita

And I think what might end up happening and I'll close with this, is that we are going into the conference allegedly in the most bearish ever oil market balances outside of Covid, right? Yeah. Deep down, my gut says we'll probably come out of it. Everybody's going to be like, no, this is actually really bullish.

Jeff

Yeah yeah I, I agree with that.

Amrita

Well we'll see it. But I just have a feeling talking to the speakers, talking to a few who are coming. Like you said, there's a few closet bulls. They don't want to come out and say it, but I think more and more of the data that's coming out just kind of suggests that, that the glut that everybody's talking about is just not there.

Jeff

No it's not.

Amrita

Thanks, Jeff.

Jeff

It was a Pleasure to be here

Amrita

I see you in a couple of days.

Jeff

Excellent. Looking forward to it. Thank you.