Unraveling the Complexities of Energy Markets with Expert Amena Bakr

Unlock the secrets of the energy market with the astute insight of Amena Bakr from Energy Intelligence Group. Our conversation journeys through Amena's transition from a journalism background into becoming a vital voice on energy trends, focusing on the delicate interplay of oil prices and Gulf economies. We dissect the roadmap these nations traverse, balancing economic diversification with maintaining oil prices that fuel their development ambitions while steering clear of demand destruction. Amena's profound knowledge brings to light the intricate dynamics of the Middle East's energy landscape, providing a rare glimpse into the strategies employed by countries like Saudi Arabia and the UAE to secure their economic future.

Imagine a world where global economic uncertainties and geopolitical chess moves set the stage for an unpredictable energy market. This episode paints a vivid picture of the current geopolitical risks, including the curious case of how major events once capable of causing oil price shocks now barely ripple through the market. We discuss potential oil price spikes tied to conflicts in the Middle East, OPEC's delicate dance to manage market expectations, and the looming question of whether technology and AI could redefine our understanding of the energy sector. With Amena's invaluable expertise, we scrutinize the shifting landscapes that investors and policymakers must navigate.

Journey with us as we wrap up our dynamic discussion with a peek into Amena's meticulous process of energy analysis and research. We share resources for those hungry to dive deeper into the energy sector, spotlighting where to access Amena's comprehensive reports and the latest updates. This episode goes beyond the surface, offering a powerful synthesis of the complexities that shape the global energy narrative. 

The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.

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Transcript

Speaker 1: 0:08

My name is Michael Guyatt, publisher of the Lead Lag Report. Joining me for the hour is Amena Bakar Amena. I'm looking forward to this conversation. Introduce yourself to the audience and to me a bit more formally. Who are you, what's your background, what have you done throughout your career and what are you doing currently?

Speaker 2: 0:22

Thank you, michael, and thank you for asking me to join your podcast today. So I'm Amena Bakker. I'm currently a senior research analyst for Energy Intelligence Group, based out of Dubai. I'm originally from Egypt and I've been in the Middle East for more than two decades now, covering OPEC policy upstream in the region, and prior to my role in the research department, I was in editorial for a really long time. I used to work with Reuters and other publications, and I was also the senior OPEC correspondent with Energy Intelligence Group for eight years.

Speaker 1: 1:00

I think it's the first space where the two speakers are both Egyptian. I think this is the first space where the two speakers are both Egyptian. By the way, I'm Egyptian myself. Okay, so how did you get involved in this side of the world? What is it about the oil markets, the OPEC side of things that kind of made you gravitate toward?

Speaker 2: 1:16

Yeah, so I started off my career as a journalist in Egypt and the story very much there we're talking about maybe, maybe 20 years ago, was more on the economic, social side, and when I decided to move out in the Gulf, specializing in energy was a kind of no-brainer. The most important thing that drives the economy here is oil, and I had a boss at Reuters at the time. He told me, listen, you need to specialize in oil if you're planning to stay in the Gulf for a long time. So that's how it came about.

Speaker 2: 1:45

Fast forward to 2024, we're still seeing a lot of these Gulf economies. Despite all the diversification that's been happening, they still very much rely on revenues coming from their oil and we're hearing more and more now as the transition kind of gained pace. In other regions around the world. A lot of defense is coming from OPEC producers and, more specifically, gulf producers, reminding everyone how important the upstream industry is in terms of energy security. So, yeah, covering energy at this point in time has become even more crucial. Michael, as we see, like any kind of disruptions that happen wars, etc. They immediately have an impact on our energy use and energy consumption, energy prices too.

Speaker 1: 2:33

All right, so we're gonna get into a lot of different dynamics around OPEC and geopolitical tensions, but use that term diversification. These Gulf economies still obviously very reliant on the price of oil. I am curious when you say diversification. What initiatives have been taken and is there any way at all that these Middle Eastern countries can squash how much reliance they have on oil?

Speaker 2: 2:55

Well, it depends on the country. For example, with the UAE there's been a lot more diversification compared to Saudi Arabia, for example. You have trade here, tourism, real estate, so the economy is very much diversified compared to others. Saudi Arabia are trying to move in the same direction. I'm sure a lot of you read about the new projects that they're building around the Red Sea in terms of tourism. They have that futuristic city, neom. So their crown prince even said it very bluntly that oil is a kind of curse and they have to move away from the curse of oil and the only way to do that is use the oil revenues to fund other projects. And this is exactly what they're aiming to do and that's why they need oil prices to stay within a certain range so they could afford this very high level of spending.

Speaker 1: 3:51

On consistency of demand, broadly speaking, what is that range and where is the sort of upper band where it becomes, from the perspective of OPEC members, a problem?

Speaker 2: 4:12

Well, I'll talk about Saudi Arabia, because it's the biggest producer, or the biggest, more rather the largest exporter and the dominant member at the OPEC Plus group. So for them, we estimate an energy intelligence that their break-even is within the 80s band. So 80 to 85, this is the price that's good for their budget, good for spending. Any higher than that, I think there will be concern over price, sorry around demand destruction. So they don't want to see prices shoot up to the high 90s or $100. This is contrary to. I know a lot of people think that, okay, these OPEC Plus producers want to see the highest price possible, but that's not necessarily the case. So for Saudi Arabia I would say, yeah, 80-85 is kind of where they would like to see Brent at.

Speaker 1: 5:02

It used to be the case that, at least from the perspective of the US, whatever was happening to the Middle East would have real problems for our domestic energy usage and obviously there's been less of a reliance over time, given how much the United States itself produces on the oil front. But you mentioned Brent and there is an interesting, I think, argument to be made that Brent is obviously much more vulnerable, just given the locality, versus WTI. Here in the States let's talk about recent price action because Brent and WTI have both been rising but Brent seems to be getting a little bit more relative momentum. Has it been surprising that we're suddenly maybe resuming something of an uptrend? It's early at $82 on WTI and Brent, I think, at 86. It's starting to get some headlines.

Speaker 2: 5:47

No, I wouldn't say that it's a really big surprise. This has been the expectation with a lot of these Gulf members, the reason that they've been tightening their supplies and especially with these voluntary cuts that they have through OPEC. They wanted to tighten the market and they expected this to happen. As demand rises, you are going to see prices move in that direction, and it's not just, of course, the fundamentals are helping support the price, but we have other factors that do play a part Geopolitical tensions in various parts of the world, whether it's the Middle East you have the Houthis in the Red Sea, these recent attacks in Russia so all of these are factors that are helping hold the price above 85. So, on the fundamental side, I would say no, not a surprise. They expected it and that's the entire reason why they decided to extend their voluntary cuts, which is that 2.2 million barrel a day trench for another quarter.

Speaker 1: 6:49

They could have released some of the supply but they decided that they would rather tighten the market before they bring it back. And I'm curious, I've never actually heard that terminology tightening the market or loosening the market. Yeah, when I hear that, I think it's almost like a switch. Is there like a long lead time from a decision being made to then it actually manifesting in supplies?

Speaker 2: 7:12

No, they wanted basically stock levels to draw from their current levels and they have the five-year average which they use as a benchmark at OPEC, which is the five-year average starting in 2019. And we've seen stocks draw quite a bit. So that's their kind of success benchmark. So they are doing well on that front. And another factor they look at is demand any kind of uncertainty around demand. There were a lot of question marks around China growth out of China this year. Opec has quite bullish numbers in terms of demand growth this year. They're still sticking to their number of 2.2 million barrels a day. You have other agencies, like the IEA, expecting a growth of 1.3 or so. So those kind of discrepancies cause leaders here or ministers. They get the idea that this level of uncertainty makes them feel that they should just hold on to the cut until there is more certainty around demand. So that's the idea behind keeping the cuts in place for longer.

Speaker 1: 8:21

Do you get a sense that China will re-accelerate and be a bigger wildcard than the Houthis, for example as far as impacting oil prices? It seems like that's the question mark. A lot of people are expecting some kind of reacceleration, but it's challenging given the debt loads in China, the economy and political will, I think.

Speaker 2: 8:38

Yeah, no, China, I mean kind of a big question mark even for us. In terms of estimates We'll have to see. There is a wide expectation among all agencies and forecasters that by the second half of the year we are going to see an acceleration in demand. We're seeing growth in places like India. This year, India is forecasting GDP growth of 7% or even more, so we are going to see an upside, but with China specifically, that's still uncertain.

Speaker 1: 9:08

Okay, so let's talk about the geopolitical risk. When I look at the price action, it doesn't look to me like the oil market is overly concerned, at least not yet meaning it's not like there's some premium for the geopolitical risk being priced in, Meaning it's not like there's some premium for the geopolitical risk being priced in.

Speaker 2: 9:30

But if you were to think through the top three biggest upside risks to oil, what would those be? I think geopolitical risks would be definitely one factor in there, and I know that the market hasn't been responding. Almost on a daily basis We've been getting attacks by the Houthis and just recently I think yesterday the Houthis even warned that they are going to be attacking Saudi vessels, but the traffic is still going through. We haven't seen any major supply disruptions because of that possible Houthi intervention. Maybe that kind of justifies why we haven't seen a big spike in prices. But even so, michael, if you would have told me this risk was there 10, 15 years ago, I would have told you OK, yeah, we would probably see prices at $100.

Speaker 2: 10:12

But people are dismissing it. I think they're underestimating the risk and a possible supply disruption With Saudi Arabia. They're lucky because they have the East-West pipeline. They can divert some of the supplies and avoid the Red Sea. But that's a factor that I would put in, that's a possible. If things escalate there or get messier, that's definitely a risk that I would say that would drive prices up. And we've been hearing also some speculation around a possible intervention by Saudi Arabia or the UAE to counter what the Houthis are doing. This is still speculation in the market, but if some kind of again like intervention happens, this could have an impact on prices. Other risks major outages. We've seen a few of the attacks that have happened in Russia taking out refineries. That has had a kind of a small impact on prices. So that's another possibility and I would say yeah, any other supply outages that are not factored in by the market could cause an upside in prices.

Speaker 1: 11:23

Yeah, it is interesting to me that it seems like Russia-Ukraine is not even talked about anymore when it comes to the oil market. It's either discounted or any other reason for why it's not been the case. But is there any way that the Russia-Ukraine conflict could suddenly become a much bigger driver? I had a couple of people in the past make the argument that you can argue it's conspiratorial or not, but if Putin wants to affect the election in the United States, then he might be able to do that through oil, somehow force the hands somehow of different powers that be in the state. What would cause that to be a bigger contributor, you think?

Speaker 2: 11:59

First of all, I don't think so, because I've heard the same thing about the US. Whenever there's a US election, they always say OK, it's Russia and Saudi Arabia are going to get together and they're going to try to influence the outcome of the US election. Ok, I can see the logic why some people would go there, but I can tell you that it's not a factor that's in the background. Right, it's not one of the main driving forces behind policy. It's not one of the main driving forces behind policy. They don't sit there to decide. Ok, we want Biden out and we want Trump in. Therefore, let's make sure that gasoline prices are high. It doesn't work that way. It's definitely something that they're aware of. It's there, but it's not what's driving policy.

Speaker 1: 12:40

Ok, now let's talk about the other side of it, which is things that could. What could cause oil to really drop. Now let's talk about the other side of it, which is things that could. What could cause oil to really drop Now? Obviously, the big one would be sudden recession or some kind of global slowdown that seemingly comes out of nowhere. Admittedly, that seems a little bit hard to envision at this point, just given momentum that's ongoing, especially in the US at least, and again, reacceleration in China. But what would cause the price of oil to maybe enter a bit of a free fall?

Speaker 2: 13:03

Yeah, that's the main thing, Even if it's not an actual. I mean, since last year, Michael, you remember that people were talking that a recession is going to happen and we didn't see a recession happen. It's the same thing happened at the beginning of this year. So any demand here is still the major factor. The major factor. If we're going to see OPEC suddenly revise its demand number or demand is a lot weaker than we expected, that's going to cause oil to drop, Even if over the past since last year also, some of these OPEC plus cuts didn't have an immediate impact on the market.

Speaker 2: 13:38

Opec would say that they're cutting production, but you wouldn't see a response from the market based on sentiment rather than fundamentals. And then there was a kind of detachment between how the market reacts versus what the fundamentals really reflect, and that disconnect has really made setting policy for OPEC quite a challenge. So they're having to manage the market in quite creative ways, and not just through supply, just opening and closing the tap, but through messaging and coming up with these very creative ways of implementing cuts. You have the base cuts, which is the entire group is cutting 2 million barrels a day until the end of the year, and then you have a set of voluntary cuts that were introduced and then you have another layer of voluntary cuts.

Speaker 2: 14:30

Another factor to consider when you're talking about OPEC when you have the prices rising, it tempts a lot of countries to start breaking their compliance. So that's also a possibility of having more supply coming out of OPEC because of the higher prices. But till now I can tell you that compliance has been really good and improving. They seem to believe in the same message that they're moving in the right direction. And when the time comes to return supply back to the market, it needs to be done in a kind of orderly fashion. It has to be a gradual process. They can't just unload or unleash 2.2 million barrels. They're going to start with the voluntary cuts first. So it has to be a gradual process and it has to happen slowly.

Speaker 1: 15:50

Can I say on that point about the temptation, the compliant point, right, what are the actual repercussions? Meaning it's like don't do that again. What do they actually do when they sit down as a group and they see that a country is doing what they should not be doing, that they agreed upon? I can't imagine there's any kind of real punishment.

Speaker 2: 16:09

No, there's no punishment. But these are a group of producers in an alliance that theoretically have the same goal. An alliance that theoretically have the same goal, if you want to say balancing the market, making sure that supply and demand are in check, making sure that prices are fair for consumers and producers these are all kind of objectives that they have and making sure that their commodity remains relevant for the longest period possible also. So yeah, when you have lack of compliance, you don't get punishment from other members, but you do get that there is accountability, and that's why you have, every month that each country reports to the secretariat. They tell them how much they produce, and then you have the secondary sources that validate, and there are a number of secondary sources energy intelligence is one of them that give their numbers and they compare both.

Speaker 2: 17:01

And if there is an overproduction, what's happening these days is that the countries that are overproduced are given a period where they could make up for this overproduction. It doesn't happen through any kind of forceful punishment, but for now they feel obliged to continue their policy and stick together as a group, to continue their policy and stick together as a group. But that's always something that I watch very closely, because low compliance that's almost like puts a lot of question marks around policy. But for the time being I can tell you they've done exceptionally well and that's why probably we're seeing prices where they are now.

Speaker 1: 17:46

How do members of OPEC consider the interplay of inflation to oil prices? So obviously it's a big form of cost push inflation. There is a link between inflation expectations trending and oil trending up or down. Oil, certainly after inflation, is not where it was 20 years ago, which I think is not really talked about enough. But as the group thinks about macro backdrop, do they view oil as a beneficiary of inflation, as a driver of inflation? Do they not consider it at all when they're just looking at pure supply and demand? Talk about that because I think that's where it gets to be maybe interesting from a long-term perspective.

Speaker 2: 18:22

Yeah, but one thing, michael, that they get quite frustrated with when they see, like, okay, when prices are going up and the world starts pointing fingers at OPEC and saying they're driving oil prices up, they are driving inflation, they are going to crash the world's economy. It's not, oil is not the single and only commodity in the world that contributes to growth, so it's just one component of that, and they don't see themselves responsible for putting the world in a recession. But they're very mindful of keeping a price level where it doesn't destroy demand, and that depends on different points in time what that price level is, so they factor that in. But you see a lot of finger pointing at OPEC Whenever the world is heading towards a recession.

Speaker 1: 19:23

They claim that OPEC plays a part in that is what's driving broader inflation. Is the inefficiency of oil demand higher or increased right Just because there's so much more liquidity? Credit spreads are very tight and money flowing, so obviously you can absorb a higher price, which benefits them right. But it does become this sort of push and pull against central bank money printing. I would think.

Speaker 2: 19:47

Yeah, for sure. One of the factors that they always watch is the Fed, and the Fed for a while, when it was hiking great, this was a kind of force that was acting like a push and pull force that's acting against what they were doing. So Fed policy is something that they've been factoring into their decisions quite a bit.

Speaker 1: 20:07

Talk about the other side of the energy market, which is the green transition, how OPEC has been responding, how Saudi Arabia has been responding. I myself continuously focus on uranium as a big component of that very longer term in my own research. But this kind of goes back to your point about diversification, them trying to get maybe a little bit further away from oil. What are the different OPEC members' responses to other energy sources to take advantage of some of these other trends?

Speaker 2: 20:34

Yeah, they've been definitely aware of the energy transition has been a major factor in them responding, in their policies, in messaging. Many of their oil companies are also setting out strategies. They call it future-proofing their industry. So it's definitely front and center when it comes to them setting policy around their production and future production. And that's why it's very important for them as well to maintain OPEC for the longest period of time, because they see it as a market. It's the only market management tool out there that could help them gain control over demand. So, saying that with the energy transition, they are moving in the direction.

Speaker 2: 21:20

A lot of these Gulf countries have set out net zero targets. You have Saudi Arabia setting a net zero target by 2060, the UAE by 2050. You have others also setting net zero targets. A lot of the national oil companies have announced big plans for investing more in new energies. For example, they just recently released their end of year results and they said 10% of their CAPpex is going to go into new energies. So that's quite a bit If you compare that to other IOCs. Aramco's capex this year is between $48 to $58 billion. So spending 10% of that on new energies is massive.

Speaker 2: 22:01

At the same time, what was stressed at COP last year, which was hosted in the UAE, is that the focus should not be on replacing oil completely. The focus should be around reducing emissions. So a lot more investment needs to go into technologies that could cut emissions, and the logic is that emissions are the factor here. When we're talking about climate change, it's about reduction of emissions rather than transitioning into energy poverty. They see oil remaining relevant for decades to come, even if it's not in, you're going to see, maybe you're going to see in some regions a drop in consumption when it comes to the transport sector, but oil is still going to go into a lot of the downstream specialty chemicals, and that's why a lot of the Gulf companies here have been investing heavily in downstream projects, especially in Asia, focusing on India and China. So these are the kind of ways that they've been going about the transition.

Speaker 2: 23:04

With Saudi, they're taking a multi-pronged approach, if you like. With Saudi, they're taking a multi-pronged approach, if you like, to the energy transition. They're improving efficiency. They are investing, of course, in. The obvious is solar power here. So a lot of investment is going into solar, some geothermal and they, of course, they want to promote the idea of the CCS and making sure that the world knows that their barrels are the lowest emitting barrels. So they want to remain as gold for the rest of the Gulf too, as the kind of last man standing in terms of lowest cost but also lowest emissions when it comes to their oil production.

Speaker 1: 23:44

The solar is interesting just because I would think that that uphill battle against China and things they've done in the past in terms of dumping to cause prices to collapse, right when it comes to that part of the energy transition play.

Speaker 2: 23:55

Yeah, no, definitely, and it creates a new dependency on China. And this is something that they've highlighted quite a bit is that the energy transition doesn't mean that you're like it's not energy secure, it doesn't translate into energy security. You're still going to need commodities and materials that are mainly controlled by China. China has the majority of processing when it comes to the materials metals needed for the energy transitions and battery storage. They own a lot of the mines in Africa and other areas, so there is a lot of dependency on China and a lot of the solar panels here that I'm seeing in the Gulf, in the UAE and other places they're all everything is made in China, but in terms of cost, I've seen the cost is coming down quite a bit. But the issue is this dependency on China and there's a kind of ongoing joke here is that if people complain about OPEC being a cartel, wait until you meet. You have to deal with China.

Speaker 1: 24:52

I always cringe when I when I ask anything about AI, because I have a lot of skepticism and I've been wrong in a lot of the ways I've thought about AI, admittedly so far. But I do have to ask the question of is all this AI hype at all coming into discussions around the OPEC members? Is all this AI hype at all coming into discussions around the OPEC members? And either from the standpoint of the emissions point, as a way of achieving that net zero, as a way of getting or being more efficient with oil being tighter or loosened, or is it all just background noise?

Speaker 2: 25:23

No, definitely there is a lot of investment in AI and technologies looking at new ways in which they could reduce emissions, but it's not kind of the focus here. They do realize that this is a possible avenue. There is more focus on projects that they could actually implement and have immediate results. But when it comes to AI I'm glad you mentioned that a concern within the OPEC group are trading bots and how the market. Everyone says like the market has changed. It's moving in strange directions. Sometimes we see responses that we don't expect. It's not reacting to fundamentals and they see as a kind of a shift has happened in the market where you're having more individual traders to have bots, ai computers reading headlines and immediately trading. So that's more of a disruption force in the market. That's of a bigger concern to these producers.

Speaker 1: 26:25

I thought bots were annoying on X. Now you're telling me they're a fancy retail market. No, but that does seem to imply producers. I thought bots were annoying on X. Now you're telling me they're a fancy fail market. No, but that's interesting, because that does seem to imply that that's like the great fear, right? Ai ends up manipulating prices and causes unintended consequences when the algos. Right, the algos Right. The more advanced version of it Is that that sounds bizarre, but is that like legitimately something that people are talking about? That's interesting.

Speaker 2: 26:48

Yeah, no, it is something, especially when they go through policies or they just. Sometimes things don't make sense and they try to understand what's going on. Why is the market shorting oil at a time where things look like they were going to pick up, or why sentiment's so low? So, yeah, the justification is usually okay. Over the past years, there is an influx of I don't know bots, artificial intelligence, algos and so on that are reacting differently to what was there before. So, yeah, no, that's a conversation that I've had with a lot of people here in the region.

Speaker 1: 27:57

I find that to be utterly wild. What about how the demand picture could change? I brought up this point before. This goes more towards electricity. But by all metrics, all this talk around AI, it's going to be the next industrial revolution. It's going to take a ton of energy, a ton of electricity. It's very reminiscent of the narratives around EV and why EVs can't really take over the world. You said because we don't have the infrastructure for it.

Speaker 2: 28:23

Is that sort of becoming a bigger portion of the? No, in terms of demand? There is no. I wouldn't say there is no concern, but the expectation is that demand will continue to grow and that's why you need more than one energy source to meet that growth in demand than one energy source to meet that growth in demand. So when it comes to, especially when you're looking at continents like Africa, for example, you are going to gain a lot of demand growth from emerging regions that can't be all met by renewable energy, which is more intermittent, and you need a lot of storage and perhaps it's more expensive. So you need to move in different directions. You need the oil and gas, you need nuclear power, you need renewable, you need anything that I mean all sources are going to be required to meet this demand growth.

Speaker 1: 29:08

Okay, let's talk about where oil can go. I named the space purposely the risk of an oil spike, because I want to get people in the room and there's a little bit of clickbait aspect to this, but that's always just the way that this stuff works and I hate to say that, but that's just the reality. When OPEC does estimates, is there a sense of how accurate historically they have been in terms of their estimates and what oil demand actually looks like? Meaning how solid is their own data as far as what the near to intermediate term picture looks like? Meaning how solid is their own data as far as what the near to intermediate term picture looks like?

Speaker 2: 29:40

If you look at last year, for example, they were pretty spot on in terms of their estimates and in terms of demand. With this year. It remains to be seen, and I'm very curious about this year because the discrepancies are so big. But so far the direction that I'm seeing is that, like the IEA, for example, they've been increasing their, revising up their forecast. We haven't seen any change in OPEC's forecast for this year and I've been told that OPEC will keep that forecast because they think it'll materialize by the end of the year. They're not planning to do any revisions, but what tends to happen if there is a revision? This is what I'm expecting, at least for this year. They're not planning to do any revisions, but what tends to happen if there is a revision? This is what I'm expecting, at least for this year. If there is a kind of drop, they'll do it towards the end of the year rather than do it up front now. But for now they're holding steady.

Speaker 2: 30:30

When it comes to their numbers, yeah, keeping that very bullish number of 2.2. Historically, I would say they have a very in terms of having all the producers, all the major exporters in the world being part of this group. They know, or have a sense of where demand is going. So they do get a clearer picture better than other agencies. So, yeah, take it with a grain of salt. Of course, all these numbers, there are agendas behind them, no matter what the number is. But OPEC's been pretty good on their forecasts.

Speaker 2: 31:05

No, that's a really good question, Christine. I won't be able to answer you because I don't cover Russia, but I know that Russia does not have storage capacity per se that they would be able to make up for filling this export gap. So that's an issue that I think we are going to see a drop because of the attacks Making up for making up the slack. Maybe you're going to see more from the Middle East refineries here exporting additional volumes, but if it's just a temporary situation, I don't think it's going to be a major issue.

Speaker 2: 31:46

I can't say for sure because, again, Russia is not my area of expertise. But what I can tell you is that there were concerns when the war first started is that Russia would not be able to keep a lot of their refineries or their their fields working because they need parts or service companies etc from from around the world and since they're under sanctions. But from what I've heard from my colleagues there is that the issue of spare parts service, et cetera. Getting these refineries repaired. It might take longer than expected, but it won't be an issue because they are under sanctions and cannot find alternative solutions within Russia.

Speaker 1: 32:28

Mena, you've been covering this for some time In the last two, two and a half years. In particular, has there anything that, to you, has been surprising in the way that oil market dynamics played out? We went through some actually pretty historic movements when it comes to asset markets the greatest duration crash we've ever seen in government bonds market recovering, or at least the S&P while a lot of stocks beneath the surface are still below 2021 levels. I still think we're dealing with a lot of these divergences and distortions, but when it comes to oil in particular, has there been anything that's been shocking to you in the way as you look back at what's happened last?

Speaker 2: 33:05

I would just say the level of geopolitical risk that we're seeing globally at this point in time whether it's the war that's happening here in the Middle East or the war that's happening between Russia and Ukraine just the insensitivity of the price to these massive risks that are happening is quite a shock and it's hard to explain. That are happening is quite a shock and it's hard to explain. So that's one thing that always surprises me is that perhaps the market dismisses these risks or maybe, because these wars have been ongoing for quite some time now, it's almost become resistant to it. So these are question marks and perhaps that also that brings about a lot of the speculation when I'm telling you oh, people here are talking about algos, traders, different structure of the market these are all explanations or ways of trying to understand what's going on where traditionally you would see a completely different response from the market. So geopolitical risk and the impact on oil prices, that's something that continues to shock me.

Speaker 1: 34:11

I go back. I've got to make the assumption. That's just the simplest answer is the right one. There's just still so much liquidity sloshing around that it squashes any of that volatility.

Speaker 2: 34:19

Yeah, possibly. And also, let's not forget supply from outside the OPEC plus group. In terms of oil supply, that's been growing with the US. You would know better on their numbers. They always tend to surprise us with larger growth. So, yeah, we hear there's more growth coming out of Guyana. Perhaps we're going to see more volumes from Brazil and so on. So that's another factor to think about. There is more supply from the market from outside the OPEC plus group. Let's talk on that a little bit.

Speaker 1: 34:49

That actually is interesting. It sounds like you're arguing more on the emerging and maybe even frontier markets. Is there any part of the globe that is really re-accelerating that, at the margin, could drive oil prices higher? I understand. These are small numbers. Small numbers can continually make up a big difference, right in terms of trajectory.

Speaker 2: 35:07

Yeah, and it all depends on okay. So the OPEC Plus meeting is going to happen on the 1st of June and if they decide to bring some of that supply back into the market at a time where you're having still increased growth from outside of the group especially if we're talking about the US supply growing or from other regions that they have to move in a very calculated manner and that's why I said earlier that the supply needs to come using a mechanism where it's very gradual, making sure that compliance stays tight, and so on. Non-opec supply is one of the major in addition to demand. The growth of non-OPEC supply is a major factor into their calculations and how they bring their own supply back into the market.

Speaker 1: 35:54

Just looking at the comment that was posted, there's a potential of more oil supply coming out of Canada, especially Alberta, as more and more rigs are becoming active at somewhere. Increasing capacity, yeah, and that goes back to higher prices creates more production. The cure to high prices is high prices. I guess the question is is it high enough to really get a lot of supply? I am curious. On a side note, a lot of the audience here, I think, is primarily US-based. I have not been to Egypt in forever, but how different is Dubai?

Speaker 2: 36:20

from Egypt. It's very different. There are a lot more people in Egypt, but Egypt right now is going through a very, very difficult time. I'm sure you've been following the news of the devaluation of the pound. It's true that there are a lot of loans pouring in as well, but the valuation has really hit people badly, especially it happened during the month of Ramadan. We're still in Ramadan now, so even basic food supplies have become an issue for the average family. So, yeah, egypt is going through a tough time. Also, geopolitically, it's right on the border with Gaza. We have the Rafah border, so that's another issue that Egypt is trying to deal with. And, yeah, in terms of culture, it's also very different from the UAE.

Speaker 1: 37:05

Maybe a final question on my end, and then we'll wrap up here Things that you think people get most right and most wrong in terms of sort of popular narrative when it comes to OPEC. From your sense of things, from the way people talk about OPEC, what do people got right and wrong?

Speaker 2: 37:20

I see OPEC being blamed for many things that they don't have a hand on. When we're talking about, for example, driving the world into a recession, that's something that OPEC always gets blamed for. Opec gets blamed for setting prices too high. Sometimes there are other factors. Opec is not the only factor out there for setting prices and, of course, everyone loves to link OPEC's objectives to kind of a larger geopolitical objective, whether it's the US elections or to have more leverage in certain regions and so on. So all of these political of course, these are things that do happen. There are things in the background, but they're not the key drivers when it comes to the group setting their policy background, but they're not the key drivers when it comes to the group setting their policy.

Speaker 2: 38:13

I've noticed more and more that these open countries, and especially Saudi Arabia, they're now focused on their own. Of course, having a good unity, a level of unity within the group, is important. They don't want to see more members leave. We saw Angola leave last year. So I think the group will be very cautious of having a sense of unity and giving everyone a kind of equal voice so they could avoid that situation.

Speaker 2: 38:36

But I'm seeing countries more and more move towards the idea that they are going to serve their own interests rather than serve the interests of other states, and by that the most recent example is Saudi Arabia deciding to not go ahead with expanding its capacity to 13 million barrels a day and rather maintaining 12 million barrels a day. And they've said very clearly that traditionally they would keep a spare capacity of 1.5 to 2 million barrels a day. In case of any kind of world emergency happens, they would tap into that. This is no longer the case. They're only going to be keeping spare capacity for market management purposes that serve their own national interests, so it's more focused on them and rather than their, let's say, traditional Western allies.

Speaker 1: 39:31

In that sense, Amanda, for those who want to track more of your work, more of your analysis, your writings, where would you point them to?

Speaker 2: 39:37

I would point them to the Energy Intelligence website and we of course have our editorial team there that cover the energy sector, not just focused on OPEC or upstream, but we cover all areas nuclear renewables and various other segments of energy and my work would be in the research section on the website. And yeah, that's where we publish our reports.

Speaker 1: 40:04

Everybody. Please make sure you check out that and make sure you follow Amena here on X. This will be an edited podcast in a couple of days and I appreciate all those that joined here. Thank you, amanda, appreciate it, thank you Bye Take care.