Last night, the Carlyle Group’s Jeff Currie and Veriten’s Arjun Murti joined Real Vision's Ash Bennington for a ZeroHedge Debate on what the oil market is getting wrong.
Surprise surprise… the EU is not looking good. But the U.S. may be in trouble too. Currie doubled down on his reserves-to-run-dry-by-July call.
They each gave their outlook on structural supply constraints that existed before the Hormuz debacle, whether the latest ‘ceasefire’ can be trusted, and where the price is headed and how quickly it’s headed there. Despite signs of relief in the Mid-East, many signs still read bullish oil (and thus bearish cost of living).
Here were the highlights for those short on time:
Currie’s July 4th Doomer Call
Currie on his recent warning that global oil inventories could run into serious shortages as early as July:
"There's a misnomer that the eight billion barrels of oil that you see in storage around the world is all usable,” he said, noting that fuel is not homogenous (jet, diesel, gasoline, etc.) and that 8 billion is not actually that much… “Every single energy analyst says sometime in that July, August is when you get into pretty serious problems."
The current calm in prices, Currie said, reflects seasonal demand weakness rather than a genuine easing of supply constraints. "Why you haven't seen this? We're in the seasonal low of demand," he explained. "April and May it goes down like this, and then June it just goes straight up five million barrels a day."
Murti agreed that shortages are likely to emerge region by region and product by product… where one country runs out of jet fuel, another gasoline. He added that developing Asia appears particularly vulnerable while Europe remains heavily exposed after years of energy underinvestment.
Asked how long it takes for shortages to be felt once inventories are exhausted:
"When you're out of something, it's it. That's it. It's over... it's instantaneous."
Turns out Exxon agrees with Jeff…
Which Countries Will Feel The Most Pain?
According to Murti: China looks good, rest of Asia… not so much. EU not great. America too complacent but likely OK.
“Europe might be able to avoid shortage by the fact that they're still rich enough to outbid those less fortunate Asian countries for the cargoes that you have… blase attitude on the part of Americans, American investors, even American politicians, about how serious of an issue this is… we're not going to face shortages like the 70s, but go tell that to the people of you know Malaysia and Pakistan.”
According to Currie: Asia will be fine thanks to China “taking care of its neighbors” but Europe is screwed.
“Europe is the one that's the most exposed, and the only reason they don't have problems is that the United States is exporting everything they have to Europe right now…” And while China has been building up inventory, “Europe, on the other hand, didn't invest in any brown. They got serious problems, really serious, problems when the Americans don't export to them.”
Check out the full discussion below, on YouTube, or listen on Spotify.