Commodity Research Group (CRG) is an independent research consultancy specializing in base and precious metals, as well energy products. The Group provides research and general price analysis for these markets, along with advice to companies seeking to construct hedging strategies.
In this podcast, oil market experts Andrew Lebow and Jim Colburn discuss key fundamental forces driving oil prices in both the futures and options markets.
About Your Hosts
Andrew Lebow
Andrew Lebow has been involved in the energy derivative area since 1980. He began his career with Shearson Lehman Brothers where he worked in the initial formulation and marketing of the NYMEX WTI crude contract in 1983 as well as the NYMEX gasoline contract in 1985.
Mr. Lebow has appeared before the State Government of Alaska as well as the State Department of Defense to discuss hedging techniques. Mr. Lebow is also well known as a market analyst and is quoted frequently in the financial press. He has appeared on television on CNBC, NBC, CNN, CBS, and PBS. Mr. Lebow holds a BA from Lafayette College and an MBA from the Kellogg School of Management at Northwestern University
James Colburn
Jim Colburn is a futures and options professional with 30 years of wide ranging experience in commodity markets. For much of his career, at Man Financial (1989-2011) and Jefferies LLC (2012-2013), Mr. Colburn worked with major integrated oil companies, hedge funds, pension funds and other entities to develop market hedging and trading strategies.
He has conducted trading, hedging and risk management workshops in energy markets worldwide.
Mr. Colburn is a published author on options trading, hedging, market making and risk management. In 1986, while at the New York Mercantile Exchange, Mr. Colburn helped develop new markets in energy option contracts by educating the oil industry, banks, floor traders and brokers, worldwide.
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Transcription
Good afternoon.
This is Jim Colburn of Commodity Research Group. I’m here with Andy Lebow also of Commodity Research Group and we’re here with another edition of energy markets.
To learn more about us, you can check out our website commodity research group.com where we post our podcasts and blog. We would like to thank our friends at EKT Interactive Oil and Gas Training for hosting this podcast. Check out their newsletters, podcasts, and learning modules at www.ektinteractive.com
This podcast should be construed as market commentary; merely observing economic, political and market conditions and is not intended to refer to or endorse any particular trading system, strategy or recommendation. We’re not responsible for trading decisions taken by anyone, especially those not intended to listen. Information is not guaranteed to be correct. This is not an offer to buy or sell any derivative. Today is May 16th.
Andy Lebow, I usually say it’s been a month and a lot’s been going on in the oil markets and I really mean it this time.
Oh my goodness, everything’s going on, Jim.
We have Iranian sanctions, heightened tensions in the Middle East and contaminated crude coming out of Russia. The EIA, OPEC and IEA have come out with their monthly supply demand estimates. Where do you want to start?
And you forgot the China/US trade spat thrown in there. There’s a lot of, well, first of all, I want to start with just my email address if you want to, if you want more, it’s alebow@commodityresearchgroup.com. Now let’s get to the good stuff. You know, with all you mentioned Jim and everything that’s flying around in the oil markets, I thought it might be good to just start with some numbers, like you and I like to.
Terrific.
Uh, and so our listeners can really get a better feel for what’s happening in the market besides the headline. And, you know, we always like to focus on OPEC as they, for all the reports of their demise there’s still 30% of world production and obviously are a key factor, OPEC and the OPEC plus.
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So I thought I’d just start with where their production was Jim. And in April we are, I think it’s going to be in May and June that they produced, according to their own report, the OPEC report, which I sorta like to use as the official, you know, the official report, everybody’s pretty close to where their numbers are. They use an average of five or six secondary sources along with their own. And they have OPEC producing in April 30.03 million barrels a day, and that is down from just last from December of 2016, uh, I’m sorry, 2017 have a 31.6 million barrels a day. And from December 16, there, they’re down 2 million barrels a day. So they pretty much have a adhered to the, to the cutbacks, that the, the deal that they drew with the OPEC plus producers, which mainly Russia, Kazakhstan, Mexico, the three leading OPEC plus producers, one of the main reasons besides the Saudis cutting back significantly, of course, and we’ve talked about this in past monthly’s have been the collapse of Venezuelan production coupled with, of course the sanctions by the US and also the loss of Iranian crude all linked to the sanctions by the US. Iranian exports before the sanctions crude plus condensates. We’re probably 2.62 point 7 million barrels a day. Uh, the US of course has now not granted any waivers to buyers, of Iranian crude. So we think that it will probably come out to be about 0.5 to 0.7 million barrels a day of, uh, of imports, maybe more, maybe less, depending of exports, maybe more, maybe less, depending on the Chinese. And of course, that’s a big loss.
Do you have a sense of where that isn’t? That right now is said?
Well, it was, uh, prior to with the waivers it was around 1.3 to 1.5. Okay. So we’re about to lose it additional say, you know, six to 800,000 barrels a day of uh, Iranian crude, uh, owing to the second, you know, the tightening of the, a tightening of the sanctions. That’s a lot of crude. It is a lot of crude.
And now OPEC plus, which is basically Saudi and Russia plus in some of the other ministers are meeting this weekend to discuss what they’re going to do. It’s pretty clear that they can make up the loss of, um, of that five to 700 a day. However, and that’ll come from Saudi. Maybe the Russians, we’ll talk about the Russians having their own problems. The Saudis, you know, can easily increase production. In fact, they’re at nine, eight right now. Right around 9.8 million barrels a day relative to what they’re supposed to be producing, which is, um, 10.2 million barrels a day. Uh, under the 10.331 actually is the, is the baseline. So this room for Saudi to go up and still adhere to the deal they did with the Russians last year and I, I think they probably will. It’s just the question of, you know, how they, how quickly they did, you know, they, they increased production and they’re not giving any indication that it’s going to be a, you know, it’s going to be like this month, you know, May and June.
Well Russia has its, has issues with contaminated crude coming out of the, uh, out of their pipeline into, into Europe. They too can increase production.
Let me just go back and there’s a, you said there’s a meeting this weekend and that’s, that’s the monitoring, that’s the monitoring committee, but they’re going to talk about Iran. So is is it possible that the Saudis increased come out and say, we’re going to increase by 500,000 come out of this meeting? Are they going to wait till the June? You know, there may be, there may be chat coming out of this, this meeting. It’s possible, you know? Yeah. You never know. Now you never know. You know, they have a whole different way of communicating. So it is possible that the, they say they’re going to increase or they may say, you know, we’re with the market wants crude will give it to them.
Right.
And not say what they’re gonna what they’re gonna produce. All right, so yup, go ahead. Key factor at all this. Okay. Yeah. All right. Here’s the key factor. Saudi can increase up to, let’s say 10.3 and UAE and Iraq and Kuwait could throw in a little bit more, but it only is going to get back to the 30 or to say 30 or 30 and a half million barrels a day of OPEC production. Okay. 30 30 point. I’m sorry, 30 to 30.2 maybe. Now that’s great, but demand for their crude in the second and third quarter is going to be like 30.6 or 30.7 million barrels a day. So Saudi can replace Iran easily. Yes. It’s still leaves a global deficit in second and third quarter. So the fundamentals, and that’s against the backdrop of inventories being only slightly above normal. So it isn’t like we’re fat and happy on inventory. We’re not, you know, we’re, we’re normal. We’re okay, but you know, we’re not brimming in inventory. Right. So, Yup. Before, before we go on, I just want to mention OPEC had been getting sort of helped, uh, from Venezuela going down and, and uh, they’re, they’re now in that OPEC report, they’re showing 768,000 barrels a day. Right. Which I was actually up a little bit from last month. So you know, is that, that’s kind of bottomed out. We’re not gonna see any more declined from any, they’re, they’re pretty much at rock bottom.
I think. I think seven to 800. The is where they’re going to be for a bit here. Could they go lower? Yeah, they probably, they probably could go lower.
And also the, uh, we also always throw in Libya and Nigeria as big question marks with Libya last month was 1.176 in Nigeria is 1.8. So I mean that at least there they’re not declining as well.
Well, for now, for now, for now, there’s a civil war going on in Libya, so certainly it’s possible. They call, Trump reached out to, to a general Hadar. Yeah. I’ll wait to talk about, you know, don’t mess with the oil supplies, but who knows. I think the key thing, Jim, we’re, we’re at a big deficit right in the market. Seems to say, Oh, well, you know, the loss of Iranian crude, it’s no big deal because the Saudis on that, we’ll make it up. Yeah, that’s right. But they’re not making it up to where there’s going to be any kind of surplus, unless everything changes, you know, and they blow the deal up. But this, I don’t see Saudi doing that because they’re pretty happy with the prices here.
Yeah, that’s right. And that it’s definitely a, when you look at the supply demand balances coming out of the big, those three monthly reports, they look balanced but tight as you go through the year. Is that, am I reading that correctly? Yeah. Well fourth quarter looks like it’s going to loosen up.
So, um, you know, but Q two and Q three look, look very tight and Kutu you know, now the Ma, now the maintenances are basically ending, you know, the, the, the end of May or into June, all the, all the refinery maintenances, um, eastern and western hemisphere are going to be basically over. So we’re really gonna crank run sound now. You know, starting and starting now, actually starting now, you know, we’re going to, we’re going to be banging runs the runs out and you know, we’ll probably be drawing a lot of crude coming up and you know, watch him. Yeah. The market is indicating that on, in the eastern hemisphere. Those crudes are going wild to go wild. They’ll go why the physical market is so tight. The Brent market is, is, is backwardated, the front is high, the front is higher than the back. Um, and you know, Brent’s a dot. The front, like the first month brand, um, physical is a dollar over the second month, 40 cents, a dollar is a dollar off.
And that’s, that’s up from say, couple of months ago.
Yeah. When it was flat or under. Right. You know, and Brent was, was contango. So, you know, and the Asian crudes are, are very tight and us crudes, you look at Lls, yeah. You look at the, the, the port crew, the off shore crudes like LLS and Mars, they’re going not, you know, the way backwardated over dub, you know, the way over Wti, Wti is probably the only thing that’s contango.
Yeah. And that’s because we have more of a, uh, oh, I don’t want to call it a stranded asset, but we’re, we’re filling up Cushing more is that, I mean, yeah. Yeah. Cushing study club, US stocks of course have, have, have increased significantly over the last couple of weeks in, um, the mid con in that and also on pad three as well as [inaudible] and pib five. But yeah, the, the front is, the front is, um, Carrie is contango where the second month is, is higher than the, a is higher than the first month.
And that’s just waiting for the, uh, runs to come to their refinery runs to come back. Yeah, exactly. Yeah, exactly. And then, and also the increased production in the US right. Expected, I guess.
Let’s, I just want to mention, you know, the, uh, oil markets up today, stock market’s up today. The, the correlation is about plus 0.46, which is, uh, you know, if you look at oil and, and, uh, say diesel and gasoline on the, on the futures markets, it’s about 9.9. But this is a, this is the second highest correlation is the crude with the s and p. And I’m guessing that reflects the, uh, global demand issue. Do you want to talk about that for a second?
Yeah. Let’s talk about that because that’s really just as I lob one in there. Yeah, you totally live within in there because despite the fact that there was, were Saudi vessels hit in the Persian Gulf and the, you know, their, the facilities were attacked. Market somehow went down on uh, on Monday, you know, and in sympathy with uh, the global sell off and the reality, you know, the reality is that demand has been good. You know, it, it’s been good. It’s not, you know, it’s, it’s not being choked up, choked offthe, the IAEA shaved about 90,000 barrels a day off the year. But it, but it sounds like they were looking at a slower, I think what our quote demond say, slower demand in in Q one is short lived that right.
Does that, that’s what that 90,000 was about. Yeah. I think that is worth the 90,000. You know, there’s still expecting a strong petrochemical demand distillate demand. This is actually been pretty good. Diesel man are good. And we’ve got, of course you’ve got this imo 2020 staring us in the face, you know, for a later, later in the year. So it’s, it’s interesting, you know, we were talking about the rising tension in Middle Eastern is actually bad attacks on the shipping and the pumping, I know in volatility is, is gone down. So I mean it’s uh, you know, there’s that tendency of option vol to move with price. So as price goes down, it involves go up as price goes up Voskuhl down. But you know, during middle tensions that may actually escalate, you would think that it would hold its own or move higher but go higher.
Yeah. So a, it’s a 20 sit in at 26 for, you know, we came into the year in January at 53 got down to around 22 then as we came, prices came off, we get up to 30 and now we’re at 26, four. So, you know, that’s Kinda shaking, saying, well it’s, it’s not going to escalate is what it tells me, but, right, right. And I think most analysts and traders and you know, don’t, don’t think that it’ll escalate, but nevertheless, you know, you saw, you know, there were actual attacks. Yeah. So we’ll see. But getting back to on the demand side, so the market sells off broadly, you know, along with on risk off days and you know, the reality is that it’s unlikely that demand is going to fall more than, you know, like the IAA had it down 100,000 for the, for the year.
I mean, you know, the most I could see his two or 300 maybe, you know, a day. I think the market continues to, uh, you know, it overreacts. It’s completely overreacts on the downside, which is I guess not that unusual, right. Sham, that it will ever overreact. That, that said, there’s a lot of new length in the market. That’s one of the, you know, that, that’s one of the reasons, yeah, we’re up at the, you know, in the equity markets we have a record highs. So you, so even if you didn’t have the trade war going on, you might expect a little pull back. But you know, I always talk about this, oh my God, world that we live in, that things seem to be stretched in both directions a little further. But, um, you know, and like I said in the option world that we didn’t get the, Oh my God world, we got that.
We get the whole home, which was really, you know, really of strange isn’t it? Yeah. There’s so many cross currents going on. It’s hard to tell. So today we’re stock market’s up, oil’s up. But why as oil up maybe, you know they’re saying because the rising Middle East tension so, right man maybe. Yeah. And probably some risk on. Again, I, I’m not, I’m not sure, but I think oil, you know, I’ve tried to explain on its own, you know, the fundamentals look foolish here, intermediate term plus, you know, we’ve got global tensions in the, in the Persian Gulf on top of that, on top of that, you know, it’s not really, it’s not really a recipe for, for going, you know, wanting to go short, you know, except you know, if you want from a hedging standpoint and I think we’re probably seeing some of that hedging going on and in 20, you know, in 2020 in 2021.
So, um, let’s just say, and I don’t know if it’s going to happen or not, but let’s say the Saudis come out of this meeting this weekend and say we’re going to add another 500,000 market comes off your, you’re suggesting that even with that the fundamentals are still tight. Is Market’s not going to fall apart. Yeah. Even if they came out and said that if they said they were going up a million, that’s a different story. I think the market really expects that over the next month or two, you know, the Saudis are going to get up to 10, two or 10, three, you know, which again is within within their deal. And the Russians, you know, that they have capacity, but they’ve, they’ve got, you know, as I mentioned, they have some issues with the, with the pipeline, with exporting crude into, into Europe, uh, on contaminated, you know, the crude was a contaminated right, which they fit gonna fix, but it’s going to take months.
Yes. Well I’ll tell it to, to borrow on the EIA. Uh, let’s see. He was Eia, I think, uh, it’s, it’s quote the saying the um, the supply response will take months. The Uranian disruption weeks in s and of course there’s an a Russia disruption as well. We’ll, we’ll take months. So it’s kind of like you, all this stuff has, has a time element to it as well. So, um, but again, all of this kind of feeds into your market’s going to get very tight going for. Yeah. Right. And the, the physical markets, you know, are indicating that they are tight. They already tight and they could, yeah, they could get even tighter. I mean, Brent, that’s really seriously backwardated and um, you know, with, with, uh, they’re, they’re heading into maintenances, uh, in the off shore, you know, the crude maintenances. Right. But nevertheless, you know, runs her about to, you know, run.
So really about to spike now the EIA also up there, US production for next year by 300,000 barrels a day. Right. So that’s, that’s no help. Yeah. I mean it’s not, yeah, it’s next year it’s 20, 20, although they have, you know, for 2019 they have a crewed up like one, one five and then another 600 from a NGLs. So there are, so they’ve got like over 2 million barrels a day increase for this year and a lot is going to be in, in second half. Suppos supposedly the, the IAA, I don’t think it’s quite that quite that big of an increase for us. Uh, crew, you know, US liquids, but they’re up about 1.7 1.8. And, and that’s where I was saying in the fourth quarter, things look like they could loosen up some possibly, you know, possibly if these numbers, if this comes, you know, we’re at 12 one right now, I think on us production and they’re, they’re saying it’s going to get in fourth quarter, it’s going to average 13.
So we’re looking at a 900,000 barrels a day increase gem right there. Like you though. Well, we’ll see if they come, you know, if that’s what’s happening, the rig, the rig counts don’t indicate it would be that big of an increase. But you know, you said is that increasing takeaway capacity to write and this increasing takeaway capacity, which, which should, it should help, we’ll exports will be higher. And, and the, um, you know, Midlands, which right now I think Midlands trading $3 on there, Wti and which would be Wti, Wti in Euston is $8. So it’s $11 differential.
And that’ll narrow in Nice. If you have a space space, you’re, yeah, you’re brilliant trader. You’re brilliant. You’re brilliant trader. Well, as we’ve said many times, right? Some guys whole years are made because they had storage. Right, and the angle market, right? Yes. Right. Yes. Backwardated market. It doesn’t really help you that much. Um, I just want to go back to the OPEC report in 2019 showed a call on OPEC oil 30.6 for the year, which is a down a million from last year. And there, you know, obviously they have the US up, but they’re also have that Brazilian number. We’ve talked about this before, up 300,000, which we have the, uh, I don’t know about the inquiry light on, but we’re, you know, that’s, you think that’s possible number that is that going to happen? Well, you know what, if you look at their infrastructure and the new FPSO facilities that they’re opening, um, and the priests, you know, pre-salt it, it should, you know, it could, it really could, but yeah, we’ve seen that not coming, you know, and that’s a big number.
You know, that’s a big number. They really, if they don’t come through, that’s, that’s another, obviously that’s a pretty bullish factor. Um, and all these calls are based on the u s us coming through, you know, when we talk about the, you know, what’s the demand for OPEC crude, you know, it, it accounts, it’s also accounting for what, where we’re producing. Right. Cause right. Will cause we’re displaced that million barrels a day. It’s US displacing OPEC. Yes. Yes. Okay. Let’s, let’s move on to a gasoline. Can you just quickly give us the, uh, what’s been going on there with the uh, supply demand stock level stuff and then looking at guests lean? What an interesting story. I think a few months ago, you know, at the beginning of the year, gasoline just looked horrendous and it looked like, you know, there was, there was no hope for, for gasoline. Inventories are really bloated.
Demand was lackluster at best. This us, uh, us, uh, and in the last few months, gasoline inventories of drawn really have drawn sharply, a much more than a much more than seasonal because a refiners have been unable really to get to. Yeah, they’ve eat, they’ve taken longer turnarounds probably in preparation, partly in preparation for this Imo to 2020, and they’ve, they’ve been issues, you know, things have gone where they been flooding, you know, mid flooding in the Midwest. Uh, you know, storms in tech. I mean there’ve been issues and operational issues, so we haven’t really made as much gasoline is as we had thought we were going to make. And as a result, stocks have drawn and right now gasoline, which was, we look at days supply, which is a good handy indicator, you know, how well, uh, again, you know how well any product is an inventory where that, where they’re at and gasoline right now is 24 days supply, which is inventories divided by demand.
The four year average is 25 days’ supply. So we’re, we’re into the season on the, on the low end for a gasoline. Now that’s going to change because we are eventually going to get our runs up and you know, gasoline is probably going to flatten out and maybe start building a little bit. Con Coming Up, uh, was, it was still a little, you know, we’re, we’re still below where we should be on a crude runs and on gasoline production. The other thing is apparent disappearance is not, is not bad. It’s not great. I mean it’s, it’s improved from right earlier in the year. So gasoline is, is I think been, you know, the cracks have really done well. Cracks being gasoline prices versus crude prices. They’ve rallied over the last few months with this gasoline draw. So gasoline, us, gasoline went from looking, you know, absolutely awful to, you know, looking good is the leadership, you know, leadership and what does it, what does the price curve tells you?
Is it expected to continue for awhile or what’s like the front, the gas, well that’s always taught that, that’s always tough because of the change in uh, you know, change and specs. Yeah. Typically the gasoline curve doesn’t, doesn’t tell you a lot. Right. Cause we’ve got march, April, you know. Right, right, right. Set Bach. So that does is, that’s what the specs flip. Um, so, but you’re saying that runs coming back. We’ll probably, yeah, it’s going to flatten it. It’ll, it’ll, it’s gonna Flatten. Gasoline exports have been pretty good too, but I think it’ll, I think it’ll flatten out and we’ll see. You know, I don’t, I don’t know. They pump prices are high enough really to make that big of a difference yet, you know, if they were to go much higher than, you know, maybe they’ll, maybe there’ll be some demand effect.
Uh, there’s a lot more people at work.
Yeah. And so then that’s a great point, Jim. I may be, uh, you know, maybe that’s helping the, uh, the gasoline demand, so, um, yep. What’s going on in the, in the, uh, options world gym?
Well, um, funny you mentioned that the, uh, I want to say not a heck of a lot, but it’s, um, you know, we were tracking the monthly, the average daily volumes by month and marching dipped to under 100,000 per for a day. And April came back to one 30, 3000 a day and it looks like, uh, may might be running around that number, maybe a little bit higher, but it’s, um, it’s a, it’s a pretty balanced market. I mean that there was some, uh, uh, June, uh, 60 put a flurry of June 60 and 55 put puts were bought, you know, good, you know, over 10,000 contracts. Um, but other than that, it’s hard to find, uh, and those go off tomorrow, but it’s hard to find a, you know, big trades going, going by, it’s, it’s spread out. Uh, the, the most open interest is a, is a d 60, did you g 60 call that a DCE 50, 55 puts the June 55 put in the June 60, put I mentioned all about 30,000 open interest and you know, so it’s, those, those are big, you know, the good numbers and not huge numbers of volatility I mentioned is I’m 26 and a half, which is kind of, you know, it’s kind of, to me it’s Kinda on the low side.
But, um, if you’re looking at a market that’s balanced, um, you know, that, that makes sense. But if you’re looking at a, you know, a, a, an uptick in the Persian Gulf tensions, that’s, that can be quite low. So, uh, and my bias is always, I don’t like, I don’t like selling options. Um, what your chat today suggests as a, a, a, you know, a put selling type of, uh, a strategy, I think, you know, a sideways to higher moving marketed a, is that, is that what you’re looking at? Yeah.
Yeah, I think so. Um, you know, I’m trying to think what would, you know what would change that? Right. I guess it would be a Saudis increasing by a million a day would certainly change that or maybe releasing the result, you know, reserves. But, you know, there’s really no code, no need for that yet. It doesn’t mean anything with this administration, but, right. And they’re gonna, you know, you had the sense after what happened last year, where were they, uh, you know, expected Arabian Ah, sanctions and they, and they got waivers instead that they’re going to wait. And See, I mean, I, that’s what I would expect, but I’ve been wrong a few times over the years. So who will will lose out? Um, so getting back to, what about this, let’s say, and the, um, you got this, uh, you know, 2020 Imo fuel standards coming up and, um, uh, how, how, you know, what’s, what’s, what are we seeing? Are we, what are you looking at?
Well, this, let’s, uh, have kind of this let’s, we’re running on the, again, guilt looking at those days supply, um, quite a bit. You know, earlier in the year this little red Tories were, were really late last year and early this year, this little bit Tories what we’re really pretty tight. Uh, we were running as much as five days behind the four year average. And now we are basically only one day behind the four year average. And we’re ahead of last year’s numbers. Last year at this low was, was titled a year. You know, there’s a lot going on with the IMO 2020 refiners, refiners, blenders, shippers, all have to, you know, figure out what, what they’re gonna make. Um, and how they’re gonna make it. Uh, and we’ll see whether or not distillate inventories, you know, there’s some talk that, uh, refiners who don’t want to start building a middle discipline inventories in, um, uh, in anticipation of the change in Spec, which is, which is a way from a high sulfur fuel oil to a low sulfur, a lower sulfur Gasol 0.5%.
So it’s a, it’s really a new SPEC and it’s gonna mean demand for a middle distillates is, is going to increase. Uh, there are all kinds of numbers flying around by, by how much it is. It’ll probably be less what people think because it, it, you know, the markets are preparing for the, it’s been, since they’ve known about it for 2016 and now they’re preparing. So we’ll see if, uh, you know, if middle distillates Fox increase, we’ll look at the, you know, we’ll look at the yields, whether, whether or not these, um, you know, the, the yields increase, they’re beginning to the expensive gasoline, which, which could be there, could be supportive for gasoline the later on. So, so the, um, you know, in the middle of this sled market is, is going to be very interesting coming, coming up, uh, over the next, uh, over the next few months.
Yeah. It’s, um, you know, I did this, um, guest lecture a few years ago and I was talking about optionality that naturally occurs in the business of, um, you know, oil. And, uh, I was talking about the airlines if they have a flight where they short flights hops, where they go from one city to the next and, um, you know, faced with three different, uh, jet fuel markets. And as I was thinking more of like Europe and, uh, they have the ability to top off their tanks. You know, there’s a, there’s a little sort of tolerance there that they can play that option. And after that, uh, after the class, this guy came up to me and he said he was on a cruise and they pulled into this, you know, port, there was nothing going on there. And he asked, you know, why don’t we stop it here? And the guy said, as this cheapest fuel around. So I’m wondering if that, if that option goes away with these new, uh, standards, but, um, you know, we’ll find out. We’ll see. We’ll see. Yeah, we’ll see the, the shipping industry that has a installed scrubbers, right. Spent millions and millions on that. And I think it’s really gonna be, you know, blending, blending it and making sure they’re at the ports where they need to be. Right. You know, that this fuel, is that the right fuel? Is that the, the ports? Yes. Um, so, you know, it’s a, it’s a massive undertaking to by the industry cause yeah. Yeah. 4 million barrels a day of the demand is, is affected. So it’s a, you know, big numbers.
Andy, uh, I think, uh, we kind of covered a lot of stuff here to did what did we miss? Do you want to say anything?
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I think we, yeah, I think we covered a lot. You know, there’s still, obviously there’s like, the second half of the year is going to be a doozy, I think.
Yeah. Yeah.
I think we’ve been pretty constructive towards this market. And you know, talk with drones flying and ships being attacked, you know, what would this have been like years ago? You would’ve gone crazy.
I remember the First Intifada where, where oil market valves blew up, people got really nervous and, and all of a sudden people realized there was no oil in Israel. But the markets reacted to it. The markets reacted. And now we have some actual attacks going on and, you know, market’s reacting.
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