No Peace, No War and No Flows with Aldo Spanjer

Summary

The HC Commodities Podcast

Episode: "No Peace, No War and No Flows with Aldo Spanjer"

Host: Paul Chapman
Guest: Aldo Spanjer
Recording Date: May 15, 2026 (Released May 20, 2026)

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Episode Overview

This episode dives into the effects of the ongoing “frozen war” involving Israel, the US, and Iran, focusing on its disruptive impact on global energy flows and the broader commodities market. Paul Chapman and energy market expert Aldo Spanjer analyze the status quo, the market’s struggle to price in risk, possible escalation or de-escalation scenarios, and the longer-term ramifications for oil, gas, and the structure of supply chains. The conversation is rich with market insight, forward-looking scenarios, and practical signposts for industry participants.

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Key Discussion Points & Insights

1. Current Status: “No Peace, No War, No Flows”

[01:24]

• Market Overview: Hostilities in the Middle East have settled into a tense stalemate, with the Strait of Hormuz essentially closed to energy flows.
• Supply Impact: About 20% of global LNG and liquids are offline, creating a significant supply gap.
  • “For as long as this process is ongoing, Hormuz is just closed and I lose the flow. So I lose 20% of global LNG and about 20% of global liquids.” — Aldo Spanjer [01:45]
• Market Confusion: Despite the severity, the market is divided over whether escalation or de-escalation is priced in, with physical traders and financial players taking divergent views.

2. The “Frog Boiling” Effect & Cascading Infrastructure Challenges

[03:17]

• Steady Deterioration: The longer the stalemate lasts, the worse market balances become, as opposed to the usual assumption that a static situation means stability.
  • “This is probably what worries me the most in this market… if we do nothing, it gets worse and that’s the scary part.” — Aldo Spanjer [04:45]
• Infrastructure Risks: Damage to delicate infrastructure and trust around restarting flows is mounting, with every week of inaction compounding the later challenge.

3. Missing Barrels: Stock Drawdowns & Demand Destruction

[05:29]

• Oil Supply Loss: Estimated at 12.5 million barrels per day of crude capacity offline after accounting for pipeline diversions.
• Offset Measures: Strategic Petroleum Reserves (SPRs) and lower refinery runs temporarily help, but a deficit of ~4.5 million barrels/day remains, which must come from onshore draws or demand destruction.
• Countdown to Crisis: Spare inventories are dwindling—Asia may face operational stress as soon as June-July, with outright “tank bottoms” possible by September if conditions persist.

4. Refinery Risks

[09:15]

• Refinery Shutdowns: Refineries don’t restart easily—shutting down due to lack of crude can lead to significant delays and operational risks, with restarts taking longer and being more complex than scheduled maintenance.

5. Natural Gas Parallels

[10:32]

• LNG Outages: The loss of Qatari LNG (20% of global supply) mirrors oil’s structural crisis, but timing (the “shoulder season”) softens the blow in the short term.
• Commercial Incentives Falter: Storage incentives are misaligned (prompt market backwardation), reducing commercial motivation to inject gas into storage, especially in Europe.

6. Pricing & Market Structure

[13:05]

• Backwardation Explained: Future curves display backwardation mainly because the market prices in a probability of improvement (peace/flows resuming); also, headlines dominate market swings.
  • “The market needs physical evidence—that means when it’s too late.” — Aldo Spanjer [15:45]
• Algo Dominance: Markets are trend-driven and less reflective of physical realities until undeniable evidence forces a repricing.

7. Binary Scenarios: De-escalation vs Escalation

De-escalation

[18:55]

• Initial Market Reaction: A credible settlement would trigger a rapid market collapse in prices (“the market implodes”), followed by a later rebound as logistical and infrastructure constraints become apparent.
  • “If we get a headline, I think TTF is 25 before we know it... oil will be 70, maybe 75...” — Aldo Spanjer [19:20]
• Cautious Restoration: The market won’t return to pre-war norms quickly; logistical delays, infrastructure damage, and fragile agreements all temper recovery.

Escalation

[22:21]

• Scope for Further Disruption: Escalation could mean even more oil and gas lost, $200/bbl oil, and triple-digit gas prices if the outage persists into winter.

• Long-Term Damage: The longer or more violent the escalation, the slower any eventual recovery due to infrastructure loss and political uncertainty.

  • “If this happens… I have it at 115 in that high case scenario [for gas]. And whether that’s going to be even higher—it really depends on the length of the conflict and how much critical damage we are seeing.” — Aldo Spanjer [24:22]

• Recessionary Correction: Extremely high prices would self-correct through demand destruction (i.e., triggering a recession).

8. Policy and Market Responses in Prolonged Crisis

[29:43]

• Structural Shifts: Governments likely to resort to:
  • Fiscal expansion (subsidies, support for consumers)
  • Mandated or incentivized demand reduction
  • Prioritizing domestic supply security—more storage, production, renewables, and efficiency
  • “Anything domestic has a premium now.” — Aldo Spanjer [30:31]

9. Medium- and Long-Term Oil and Gas Outlook

2027 and Beyond

[32:28]

• Demand Surge Post-Crisis: Once flows resume, focus will be on refilling depleted stocks (e.g., over 400 million barrels SPR), potentially doubling demand growth estimates.
• Tighter Markets: OPEC flexibility limited; new supply will lag demand recovery, keeping prices elevated (Aldo avoids predictions below $80/bbl for 2027).

LNG Volatility

[40:31]

• Greater Immediate Risk: LNG is more vulnerable in the short term due to fewer offsetting alternatives and infrastructure dependency, potentially doubling prices during outage peaks.
• Long-Term Bearishness: Absent continued disruption, LNG markets will be well supplied post-2028 as new US and Qatari capacity comes online.

10. Navigating the Noise: What Matters Most to Watch

[43:36]

• Key Data Points:

  • Signs of genuine compromise in negotiation positions—are red lines moving?

  • Real-time onshore oil stock draw data, especially product inventories.

  • Gas storage injection timelines and government mandates in Europe.

  • “If we keep exchanging current red lines that are mutually exclusive, there is no deal.” — Aldo Spanjer [43:52]

  • “Stocks… That is by far the biggest data source I'm looking at over the next few months.” [44:32]

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Memorable Quotes & Moments

• On Status Quo Risk:
  “If we do nothing, it gets worse and that’s the scary part.” — Aldo Spanjer [04:45]

• On Physical vs. Financial Markets:
  “The market needs physical evidence—that means when it’s too late.” — Aldo Spanjer [15:45]

• On Reactions to De-escalation:
  "If we get a headline, I think TTF is 25 before we know it... oil will be 70, maybe 75..." — Aldo Spanjer [19:20]

• On Policy Response:
  “Anything domestic has a premium now.” — Aldo Spanjer [30:31]

• On Future Market Tightness:
  “I don’t think I want to be anywhere below an eight handle for 27.” (i.e., oil prices not below $80) — Aldo Spanjer [36:52]

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Noteworthy Timestamps

• [01:24] – Current status of energy flows and market uncertainty
• [04:45] – How “no change” actually worsens market balances
• [08:10] – How close is oil to “tank bottoms” and market mayhem?
• [10:32] – Natural gas/LNG impact and pricing dynamics
• [13:05] – Explaining backwardation and headline-driven trading
• [18:55] – De-escalation scenario and price implications
• [22:21] – Escalation scenario, possible $200 oil, and global recession
• [29:43] – Policy and market responses to sustained disruption
• [32:28] – The 2027 oil outlook post-crisis and the need for restocking
• [40:31] – Is LNG more vulnerable than oil to physical disruption?
• [43:36] – Signposts Aldo watches amidst the news “chaff”: negotiations, stocks, storage

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Tone and Concluding Thoughts

The tone throughout is pragmatic and analytical, with Aldo consistently emphasizing the market’s tendency to delay recognizing physical strains until crisis points are unavoidable. Both participants stress the complexity and fragility of global energy logistics, urging listeners to watch for shifts in negotiation stances and hard data on inventories rather than relying on sentiment or headlines.

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Practical Takeaways

• Monitor negotiation red lines—real shifts signal real change.
• Track onshore inventory drawdowns, both oil and gas, for early warning of stress.
• Watch for government-mandated storage injections in Europe as key crisis signals.
• Prepare for continued volatility: Status quo is not sustainable, and both escalation and de-escalation have unique, sequential impacts.

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For more insights from Aldo Spanjer or to connect with the HC Commodities Podcast, visit www.hcgroup.global or connect with Paul Chapman on LinkedIn.

Transcript

[A]

Foreign. Welcome to the HC Commodities Podcast, a podcast dedicated to the commodities sector and the people within it. I'm your host, Paul Chapman. This podcast is produced by HC Group, a global search firm dedicated to the commodities sector. Aldo, welcome back to the show.

[B]

Thanks for having me.

[A]

I think it's been a little over a year since we last we had you on the show. So excited to have you back. And I guess we're in different times from counting barrels and thinking about gas storage capacity and so forth today than we were a year and a half ago. And, you know, delighted to have you on to kind of give us both a macro but also a detailed view of what you think the potential scenarios and outcomes are of the current frozen war between Israel, the US And Iran. And as you've neatly sort of titled, our first segment is no Peace, no War, and no Flows. So before we dig into the different sort of scenarios and pathways that could happen and some of the gates of those, can you just give us your assessment of what, where we are right now? What is the status of the crisis? I should say we're recording this on May 15, if anyone wants a date stamp, because things are changing quite quickly. But can you just give us the current status and how that pertains to the markets that you cover?

[B]

Yeah. Okay, thanks much. I'll focus mostly on the crude products and gas, but we can talk about anything you like within the remit. It's literally that no peace, no war, no flow. So we have at least settled down in terms of kinetic action, which is a good thing. If we would have spoken two months ago, it would have been a different world. But you can see kind of the back and forth between particularly US and Iran. But on, I think both are trying to find some way to find a deal. The issue I still have with it is that if I look at the negotiating positions, they're too far apart. I think they're almost mutually exclusive. So. And I think the efforts we're having now in what you call the frozen conflict is trying to find a pathway within there, which is. I think that's the way to do it. The issue from an energy perspective, and I'm sure we'll go into details, is that for as long as this process is ongoing, Hormuz is just closed and I lose the flow. So I lose 20% of global LNG and about 20% of global liquids. So crude in products. And the whole discussion we're having in the market now is, okay, we all know there's a gap. Everybody has different estimates but everybody kind of agrees there's a significant gap in both markets. How do we time this? How does this solve? And what do we see flowing into the market? Is this temporary? Is this long term? Does it mean we are as far away from equilibrium as some people thought three weeks ago? Or is. Are we actually overly worried? So I think I see a market trying to basically make up its mind on how bad this really is and how long this will last. And depending on who I talk to, because I talk to a lot of people as their clients is people take completely different views on this. Something physically, we're okay, we're overdoing it. Other thing, we're waiting as this last four to six weeks longer, we're running into a wall and everything in between. So I think the market is really struggling to make up its mind what the real impact here is, both long and shortened.

[A]

Yeah, I mean, I've had conversations this week where people looking at the same data, one has said to me, we're pricing in escalation, and the other one's saying, we're pricing in de escalation. Right. Just going back to that, as you sort of highlighted, and this is not a political podcast in any way, but it would seem to me, as you say, that there are these fundamental differences between the two sides, and both sides want to get out of the conflict, but neither side wants to get out on those terms. Right. So we're kind of in this frozen sort of armistice with a sort of Damocles hanging over sort of both sides or hanging over the straits. And there's an element to my mind of boiling the frog going on here. You know, we started out and the language in the commodities world was, okay, we've got four weeks before things get serious. And now we're on week whatever, seven or eight, I haven't even counted. And it seems like there's not a compounding panic out there as markets are kind of doing what they're doing and figuring stuff out. But there is a multiplier effect going on. Just can you help us understand, like, yes, the flows aren't happening, but there's other things not happening in the background as well. So shutting off production, that has consequences to restarting. We don't quite know what the damage is to that very fragile infrastructure in the Strait. And lots of ongoing trust and mechanisms around getting the straight started back up is under threat as well. Can you just zoom in a little bit into what you see right now in terms of those missing barrels and some of the perhaps Cascading effects that we aren't being talked about.

[B]

Before I go into those numbers, there's maybe one comment that's useful I think to think about as well is that this is probably what worries me the most in this market is that as long as we stay in this no man's land, effectively it's a bad thing. It actually just degrades your balances. Normally if you kind of assume some sort of muddling along scenario, whatever you want to call it, it's usually stable flat, this is worse. So if we do nothing, it gets worse and that's the scary part. So we actually need an improvement before you can really start thinking about releasing the pressure or me becoming less bullish energy effectively.

[A]

Can you just define that a bit further?

[B]

Yeah, sure.

[A]

To make the point starkly about how it's getting. There is no status quo when it comes to the energy. The molecule flows in the straits of hormones.

[B]

Now that goes to your numbers question. So if you look at shut ins in the Middle east, if we look at crude, we've got like 12 and a half, 12.6 I think is the exact number in terms of supply capacity that's been shut in. There's a lot of different numbers, but it's all around that number. Some say 11, some say 14. So that's kind of the supply production I've lost in the market. If we kind of look at how that balances out and this includes already the supplies that are being diverted. So I've already subtracted that. So basically through the pipelines in Saudi Arabia, in the pipeline in UAE and what Iran is still producing, you know, 12.6. Now then we basically have SPRs are coming into the market that will ramp up. But for now that was like a bit over a million barrels a day with oil and water, which is basically oil that was already flowing around, that's still more than a million barrels a day. So that's, that goes off as well. And we have pretty strong downward adjustments in refining runs. So basically refineries are running less because they have less oil in the Middle east. And ape it gets about six, a huge number. If you add up the numbers you've got a decent offset. But it's not perfect. I'm still at least four million barrels. If I do the numbers four and a half million barrels short. So that's basically the only way you balance the delta. The four and a half is kind of onshore draws or demand destruction. It's one of the two. And demand destruction, well needs a higher price. So that's why you would want to say maybe I need to factor in a higher price. Onshore stock draws will eventually drive a higher price. Not immediately because you balance, but as you degrade stocks, prices go up in the end. So for oil, you see, the market is kind of balancing, but it's balancing really through stock draws. And that's the tricky part because it's the last barrier we have. We started quite well before this when this crisis hit because we had a lot of surplus barrels. We were all talking about how long the market was, not how short. Before March, we had a lot of barrels in transit. We had quite a bit of floating storage. That's all done. So you're basically at gate number four and I think it's the last gate. And if that takes too long, I think you pass a threshold where it just becomes commercially and maybe even physically difficult to sustain flows and then something has to give and I would suspect it's price. So that's the oil story.

[A]

Just staying on the oil story for a moment. And this is sort of hitting tank bottom. That sort of did the rounds on Bloomberg and CNBC with our friend Jeff. But how close are we to that? Because the markets can draw out a lot of hidden storage and all this kind of stuff and you've got, you know, big government action. China has more than we thought and all the rest of it. Is there any sense of actually how close are we to that tank bottom scenario and does it happen all of a sudden or is it sort of a slowly bleeding from the eastern hemisphere to the western? I mean, how does that play out?

[B]

Yeah, it's a good question. So the one, one comment to make is it's kind of how you define it. So tank bottoms is literally if you're there, you kind of, you're really in trouble. I think I would look more at operational stress levels, which is higher. So you still have some buffer, but you kind of need to figure it out. I think Asia is, we're not far from it. I think from operational stress levels, I would say June, July, it really depends on how much we're going to for crude, how much we're going to rely on stock draws versus demand destruction. But I think operational stress is basically end of the quarter. If you say end of June into July, I think you're already there. If you really want to go all the way down to tank bottoms, that's quite a bit further actually. Assuming there's maybe also some hidden storage, you're right. I think you're looking at September before That happens, you have some time. But I think the point would be you really don't want to go there. Because once you're there, I think. I think it's absolute. I think it's mayhem. I think it's really a panicky oil market, which is not good. So we need to sort it well before September, that's for sure. Yeah, but it will already get more difficult around June, July, I think from the operational side of things, just on

[A]

the operational side of things and operational stress, if a refinery effectively runs out of crude, is it a simple thing to turn off or is that suddenly a three months out of commission? I don't know if you have any insight there.

[B]

I'm not a refining operator, but refineries are finicky things at the best of times. So if you kind of. Look, what I use for. As an example for this one is we have a lot of. Every year we have refinery maintenance all across the world. So you can kind of see that's planned in advance. So that's kind of as controlled as you can get. That still takes time to come back. And sometimes actually there's always some kind of unplanned outage there. I think that it takes maybe a week longer, two weeks longer. So in this case, if you have to shut down, hopefully control, but it might not even be controlled. If you kind of run out of oil in a short, I think there is risk, you stay out longer. It's a tricky prospect. Once you go out, I think you need to leave significant time to come back. In a good case, it's probably within the month, but you don't really know. I've seen too many examples of where kind of bread and butter maintenance also leads to unplanned outages. So it's a tricky thing to do in a refinery. So I would always take a little bit of a risk. A risk view on that one.

[A]

Yeah. Before I ask my price questions about this kind of the status quo, can you give us the natural gas side of the story?

[B]

Yeah. So it's fascinating to look at both, at least I think, is that of course the story at the highest level is the same as. I mean, if you take out 20% of the global LNG market, which is Qatar, and the exports there, of course you're going to be short. That's clear. If you look at the timing of the supply crisis, which was kind of March, April for gas markets, that's exactly the right time. Now, there's never a right time for a crisis, but this is the time of the most limited impact. If it happens in what we call the shoulder season, which is April, May, there is very limited demand for gas because it's not cold enough in Europe and it's not hot enough in Asia. So April, May is the best period in a year to have an outage. That's simple. So I think that's one of the reasons why people, myself included, huh. Have been surprised by where we are pricing right now. We're pricing high 40s today. I think most people would have probably projected before the crisis that's so long in, we would probably have been quite a bit higher. And I think part of the reason is in Q2 shoulder season, you can postpone consumption quite easily without too much of an opportunity cost. I think that's where we are in this market. As long as you can wait, you don't want to run the risk of being the one who buys at €48amegawatt hour. Well, there's still a chance that we have peace soon. That's not a good story internally in any company. So as long as you can wait, you wait because there's always a positive probability of peace coming pretty soon sooner than we all think. So that's why you wait. So for me, the question in gas is when does that stop? So how long can we kind of start, continue to wait with consumption? The answer is different for you, for Europe and Asia, but the timing is the same. It's in Europe. It is a storage discussion. In the end, we need to buy gas to store to be safe for next winter. And we already started at a very low level, lower than we thought six months ago. So I need to start injecting gas pretty soon. That's not happening. I think. Actually when do governments start to think that we are postponing our storage injections too long? That is a function of volumes. What we're discussing now I'm losing Qatar. It's also a function, particularly in northwestern Europe, so Holland and Germany, of incentives. Because if you have commercial storage, which the way it works in northwestern Europe, I need to make money. And you only make money by storage if your winter is more expensive than your summer. That's why you store right now with the crisis in the prompt, it's opposite. Right. The prompt is more. It's kind of more expensive than the winter. So I'm lacking the incentive, I'm lacking the gas effectively.

[A]

Yeah. Which is just a fascinating story. Right. Because that's the same story in oil as it is in gas. And you know, after all these Years. I think it's called backwardation but I mean that's a really strange pricing scenario when you lay it up against a physical realities of what's going on. Even in the status quo. The status quo, which I would. We're going to talk about these, the binary scenarios but in this status quo right now with this assumption of we don't quite know the damage, we don't know how long it will take to start up, but usually these things are more complex than expected. Yes, the ships can start moving quickly but the molecules not so much it seems. And this is where we started off with this idea that some people say it's pricing and escalation, some people say it's pricing and de escalation. We're in this weird scenario where the front months are reflecting reality to some extent but the future curve doesn't to my mind, I don't know, but seems to be quite sanguine about the whole situation, Luke.

[B]

I mean everybody will say, anyone who's looked into these markets will say the future curve is not in forecast. So fine. But it's a very tricky narrative here in that if you look at, again, take Brent futures, they just price two months into the future and two months into the future there's a positive probability that things are better. So that's kind of, I mean there's many, many more reasons. It's one of the reasons you see backwardation. You would probably always price in a probability of success or of peace which should bring your prices down. So that's one reason for, for backwardation. The other one is, is that I think the market in oil and gas as well, actually it is really dominated by CTAs right now and that means they just switch on and off on headlines. So every time you get a positive headline, we sell, you sell off and then basically your, your starting point resets effectively. So you never really, you're kind of stuck in like a 100 to 120 range it seems over the last couple of weeks. And that works in a market where you don't have many actual traders, where you really are algo driven. So it's the jawboning story. It works quite well in the market that's driven by that. And the issue is that it's probably going to remain until you believe that the physical evidence in the market is overwhelming. And we've seen this before when we've talked. I think last time I was on the pod we talked about opec, if I remember correctly, on, on how their policy works. It was the same story if you think about it in that we all kind of knew what OPEC was going to do. The curve did not price it in until they saw the actual cuts. That's when it happened. So the market, crude and I think gas will do the same. It kind of prices in the fundamentals or the balances, whatever you want to call it at the moment it happens which means it's not, it's not particularly forward looking. And all the energy analysts, myself included, we kind of look at the market that is going to significantly tighten if we keep this out for a long time. I like this price tin now because it kind of reduces my Runway and reduces the hit I'm getting. When it really happens, that doesn't happen. I think the market needs physical evidence that means when it's too late. And I think that's probably where this market is heading and I think it's one of the reasons Brent is underpricing the slightly longer term risks in these markets. It's happened before and it seems to be happening again.

[A]

Is there, and this might be a stupid question, is there any sense or evidence out there that kind of the smart, the smarter money, the physical trading houses, the physical participants in this market are more aware of the acute risks and quietly doing physical trades that maybe don't show up in, in various pricing index. I mean like it would seem to me that kind of. It probably is not a bad time to be buying and storing some of this stuff. Is there any evidence of that or.

[B]

It's hard to see for me because I look, if you go by the round of quarterly results we've seen, it's not a bad market to have physical. Physical.

[A]

So yeah, which has an interesting discussion there about sort of the efficient market hypothesis actually these different actors in there which are sort of algo led trend following and scraping whatever, you know, social media channels. Is that actually a net boon for market efficiency? And I'm generally speaking I would say yes, but I don't know. I'm sure there'll be Senate hearings at some point about all this so we'll find out then anyway. But okay, so. So if I'm hearing you right at the moment, there is perhaps we're in this status quo. The political backdrop is that neither side wants to escalate but neither side can afford to de escalate or vice versa however you want to frame it. So the status quo seems to be somewhat longer and more likely and I would assess sort of almost this we should be conversation again at the end of the quarter and things might be, as you've highlighted in a very different scenario as actually we start to see physical operational stress in the markets as, as supplies and stocks that have been slowly coming out are exhausted. Is that a fair assessment of right now? And really everyone should be looking toward the end of June about where physical supply stocks are?

[B]

Yes. Yeah, I think that's right.

[A]

Okay, so then we've got these two binary scenarios and we're going to come on to kind of some of the longer term ramifications for this and what it means to the commodities sector. And the binary scenarios are obviously escalation, which all of us now know that we could go to bed on a Friday night and wake up on a Saturday morning with a very different world. That's happened twice this year already. So that is by no means off the table. And then obviously the other one is overnight de escalation where some deal is done. Let's take the de escalation one first because there's, I think that's much more akin to the status quo. Right. And in some ways is kind of if there is de escalation, there's some kind of agreement overnight. Is that an immediately? I guess my question here is are people over optimistic about how things could go back to normal quickly?

[B]

Yeah, it's a good question. So this is tricky. So I think the way it plays out is that the moment you have a credible pathway towards de escalation and you really believe Hormuz is going to open and we're not going to tinker, there's no mines, all that stuff. I think the market implodes. I mean oil and gas both because part of the upside we're having, there's a lot of risk priced into the market. One, so that goes out, that usually goes out pretty quickly. The second one is you've got a lot of capacity on ships, both LNG crude and products just waiting to go out. So if you can basic and you, you would price that in because it takes kind of a month to land into mainly North Asia, I suppose. So you have two things. Risk goes out and you know that within a month you have really a flood because it's a temporary flood. I would think of oil and LNG coming into the market. It's super bearish. So I think if that happens tomorrow, if we get a headline, I think TTF is 25 before we know it. I mean tomorrow's Friday, so maybe it takes us Monday as well. Before at 25, oil will be 70, maybe 75, something like that. Because the initial sell off I think is going to be really aggressive and then your point comes in. I think after that people start to think, okay, but the initial wave is going to go out. That gets us through definitely in the next month or so. I need the ships back. Right. I need ballast ships during the Gulf coast so they need to kind of sail into the Middle eastern Gulf. That's 45 days. So when you do the logistics and we can go through all the items. But the point will be when you do the logistics and you think how quickly you can bring everything back, upstream production, refining capacity, freight capacity, all that stuff, I think the market will ratchet up again and kind of pricing in a relatively slow normalization over a couple of months, assuming all stays well before it comes. So the de escalation scenario I think is a strong sell off in all markets and then not back to the old level. But I think you will ratchet up again on a slow normalization given all the logistical issues we're having.

[A]

Yeah, I think there'll be a. And again, I'm a recruiter, but I would suggest that then suddenly people start seeing that as a buy, you know, recognize the new world that we're in. They're buying that for storage. Right. Security of supply. And I think also I would imagine this is me saying it so we don't have to edit it, but I would imagine as the details are analyzed of whatever agreement it is, it'll be more and more apparent that it's more of an armistice than a permanent settlement. Right. And subject to whoever's in power in Iran and all the rest of it. And you're going to have other stakeholders that perhaps aren't keen for that agreement. So I think the fragility of whatever peace can be achieved through negotiation, given how far apart the two sides are. I could see a scenario with a duck curve or whatever you call it, as you say, with prices bottom out, then start going back up quite quickly again as you start to see then evidence of the damage done. And we come onto the longer term scenarios about, you know, investing in Qatar, LNG and so forth. Yeah, and we're not here, we're just talking about oil and gas rather than sort of, you might see different, you know, much more rapid sell off. But then buyback in things like JET and some of the products as their refining story becomes clear. What a wonderful outcome as opposed to escalation, which this is very complex because. What type of escalation? I guess. But what is that? That escalation scenario can you sort of game theory that out a little bit for us and kind of how that what different types of escalation mean. What, for the different. For the markets.

[B]

Yeah, yeah.

[A]

So slightly unbearable.

[B]

Yeah. And you're right, it's very much dependent on how you, how you escalate, I suppose. But if I kind of look at the base, on what I need to get some sort of incentive to negotiate, at least negotiate seriously. Maybe that's the way to put it. I think it kind of requires from a US perspective that the Iranian exports go all the way down to zero, because I think at least you can then maybe see some kind of trade off between exports and sanctions relief versus Hormuz opening. I'm not sure it's going to be. I don't know if it's successful, but at least I can see the argument there. The blockade is meant to do that and we've already seen it come down. One way to frame the escalation is what if the blockade doesn't do the work and we continue to see oil flows coming into the market out of Iran? I mean, the US could decide to do it proactively. So the further escalation for me, and again, I don't think it's a particularly likely outcome because no one wants to do this, but it means kinetic action and we go back to the cycle where we were in, I don't even know, three weeks ago, four weeks ago, back and forth. And what it does is it does two things. It clearly lengthens your Hormuz outage so you keep it out for longer, which is already an issue. And it increases the extent of the long term damage to critical energy infrastructure. It's clear we've seen it already, but we're going to see the same story. So that's the problem. That means that if I look at oil and gas, it just gets worse. This is my $200 oil scenario. If this happens, and we would stay out, definitely into Q3. So I can't balance oil and I can't balance gas. And we're hitting winter, so oil, 200 gas, I have it at 115 in that high case scenario. And whether that's going to be even higher, it really depends on the length of the conflict and how much critical damage are we seeing. So what's, what's going to be attacked? Look, for me it's hard to kind of visualize what really the mechanisms will be, but for me it's on the narrative basis. It's simple. It's much higher for longer because it also means this. The third part is then if that escalation results in some sort of peace, some sort of de escalation, I think your slope down is slower because you've basically done more harm. So then all the talk we have in the base case about logistics, production coming back, refineries coming back, pipelines operating, that's a more difficult story because you should assume there's more damage so you have a higher peak, a longer outage and a slower return. So that's all super bullish. So that's why that scenario is really by far the most bullish I can think of. And again, I'm at 201 15. That could be higher, but that's purely a timing issue.

[C]

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[A]

us into a recession that has another.

[B]

Yes.

[A]

I mean one of the. An interesting. So it's kind of watching the op EDS in the US to sort of divine what's being fed to President Trump. And at least sort of different camps are talking. And there was an article in the Wall Street Journal written by John Bolton, the former national security advisor this week, which I think is pretty indicative of kind of traditional national security thinking. And this line from the right is very much, you can't afford to walk away. We can't afford to have an ongoing armistice. There are only two scenarios. One is the US starts escorting ships through the Gulf. It's an Operation Freedom. And the other is, which he seemed to be more keen on was to invade Iran, at least to the depth at which you can protect the strait. So whatever that is from a missile range or a hand launcher range type thing, those two scenarios seem to me to be. Well, in the first case, that kind of Operation Freedom, the US does start escorting ships out, maybe in a coalition, maybe not. That seems to me like a. It still is pretty aggressive in terms of the risks. It's pretty aggressive in terms of potential outcomes, I guess. Have you done any thinking or scenario mapping around those two potential forms of escalation and what that might mean?

[B]

So the second one is basically the high case. So the enhanced Escalation scenario. Look, the first one I've read it. But the tricky part is you can't do that structurally. So in the end, because there's a lot of flows going through a moose, if you want to normalize it, I think you need more than that to kind of settle down. So this is an interim solution for me if you want to think it through. In the end, we need to negotiate a settlement.

[A]

Yeah, it is essentially an extension of the status quo at a slightly higher ratchet level. Right. And yeah, okay. You know, when you think about that escalation scenario, and again, a lot of this, what are we talking escalation here? But there is a world there where effectively, you know, it's scorched earth and all of that infrastructure in the Strait of Hormuz, this sort of, you know, incredibly fragile, highly valuable, very complex years to replace in a peaceful environment is significantly damaged. I mean, there is no ceiling to the price of crude natural gas in that scenario.

[B]

It's a tricky one because you mentioned recession already two minutes ago. That's the balancer. So if you go high enough for long enough, I think in the end you'll destroy enough demand. So basically you will push supply up. Right? Because if you're higher for longer, let's put it like that, I think you get a supply response, particularly in oil. In LNG it's more difficult, but in oil suppliers who can supply will have every incentive to do so. It will take time because not all oil comes out quickly, but you'll see more supply in the market. That's 1, 2. That is definitely a recession. And a recession is very, very negative. So I think that's the balancing in the system. Even in that kind of a scenario, it's not unlimited upside because I think in that scenario demand through lower growth effectively will probably do most of your work.

[A]

And let's just stay on that scenario for a minute. Are there other impacts on the sort of commodity trading ecosystem that could play out that we're perhaps not thinking here? For example, okay, you switch from, you know, LNG is much harder to sort of reroute all the rest of it or figure out significant switching to coal. Do you see scenarios there where actually the Europe abandons the CBAM and some of these sort of other policy based economic factors, you know, even the way the markets function today, the TGF and so forth, I mean, you could see significant intervention and switching and challenges there play out that. I'm just wondering how should people be thinking about and should people be prepared for and thinking of some kind of doomsday scenario about, you know, actually we've got these weird exposures over here that would be immediately impacted in that longer term scenario.

[B]

I think 22 is not a bad template. And what you saw there was effectively a lot of measures. But I think the two headlines there is fiscal expansion. Are you going to help people with affordability? Which of course hampers your demand response. And I think you're going to maybe mandate or stimulate, however you want to call it demand response. I think that's where the policy measures will come in. I still remember the message in 22, wear an extra sweater and turn down your thermostat. I mean, that stuff does help. I think that's probably going to be the two biggest buckets of responses that governments actually have. The other thing I could see, again, it's part of my also the longer term narrative is that even if you are not in a prolonged crisis, but it applies to both scenarios, is that anything domestic has a premium now. Well, if I look at the last six years, we've had three once in a lifetime crisis in six years. Right. And they all had their own impact on energy in different ways, but they all impacted energy fossils quite a bit. So I think the standard reaction will also be anything domestic, and that is very different for every country. Some will domestic production, maybe that gets stimulated, more renewables build out, particularly in the power sector. I think that's probably a European reaction. Electrification in road transport, those kind of things I think will become more attractive as well. And that is structural demand reduction. So I think that will probably be the policy response over the slightly longer term in these kind of continuously tricky markets.

[A]

Yeah, And I completely agree with you here. Right. It's going to be that emphasis on the domestic, on security, on storage. So you said more storage, more domestic, more diversification. I think we can already see that, right. The Norwegians opening up the North Sea. I mean, like there's, you know, there's already sort of that recognition that that has profound impacts on the efficiency of markets and overall price going up, at least for a while and then probably plummeting as every single molecule in the world gets produced. In response to this. There's a couple of buckets I want to talk about there. So oil in 2027, let's just work on the basis that, you know, actually by June, this thing gets so critical in June, July, that there is some kind of negotiated settlement and things get. I think that's the most likely outcome as the pain ratchet is up for everyone. Political pressure, midterms, all these things. There'll be some groups that aren't happy about it, but that' essentially some kind of status quo reversion. Oil, the straight starts flowing. What do you see for 2027 for oil there? Is that a. That's because that's quite challenging. Right. You've got that immediate drop but then you've got this recognition of the world has dramatically changed. We don't know the extent of the damage. OPEC has fractured. You know, I imagine your job this year is always hard, but looking at next year is. Yeah, it's a 4D puzzle.

[B]

Yeah, indeed. I'm not sure it's going to get better. Yeah, that's, it's a good point. So look, if you look at 27 again. Indeed. Let's assume that by mid year we kind of de escalate and that we start to normalize through like Q3, Q4 and that by the time we hit I guess 27-1-1, you should probably have some sort of normalization in flows. I think that's the kind of the scenario we go with. So that should mean that in 27 you mentioned a few times ongoing geopolitical risk. Fair enough. But that's probably going to be again relatively low until we see it. I mean it's clearly how markets price these days. So no, I think the point will be there's a few points to be made. I will be quite constructive, that's for sure is that if I look at my pre war oil forecast, I need to start there because I need to make a supply point I suppose is that the discussion on oil markets before the war was oversupply. Right. We get everybody ratcheting up. OPEC bringing back US growing Guyana, growing Brazil, growing Canada, growing everybody. The pre war forecast would have been that all of them settle down. They still grow, but they grow less in 27 over 26 and they will grow less in 28 over 27. So the supply GL sett settles down. That's point one. So even in a normal market you would start seeing not a tightening but a correction in the market away from the excessive bearishness that we thought we would see. Okay, that's point one. Now I'm having after the crisis, what comes on top of this I think is significantly more demand because the first thing you want to do when you've normalized, you need to bring back the stocks you've used. That's a given. So if you look at the SPR 400 million barrels, when all is done and dusted. It's not all subscribed yet but let's assume that in the end finds its way into the market. US has a refill schedule that's almost mandated already. Korea, Japan need to return the barrels from a legal basis. So the 400 million that we are using now to balance the market and to prevent higher price impact needs to come back. Right? 400 million. That's point one. That's a lot of oil. Point two, I suspect that if you're an importer now, we talked about it in a previous point, of course you're going to diversify. You can't diversify. All your oil away in one month. Doesn't happen like that. So that's a long term strategy. You can't live really without the Middle Eastern barrels because it's such big a part of the global supply chain. So what can you do to protect yourself? Storage. So I think you also need to mull in higher storage levels than you had pre war. So one you make up from lost ground and you're probably going to increase above that. So that's kind of a crude product is the same thing. We've lost quite a bit of product stocks by the end of this crisis. Also needs to be refilled. Well, you need to run your refinery harder to make the product. You need more crude. So I think you're looking at pretty strong demand for definitely 27 and probably even a 28. Because just to give you a bit of a number to keep in the back of your head, I suppose 400 million barrels SPR is more than a million barrels a day for one year and it's, I would probably phase it out a bit more. It's probably 500 kbd for two years. So that's the order of magnitude we're talking about. My normal demand forecast pre all of this mess would have been like 600 kbd. So you're almost doubling demand. And I think this is not an aggressive assumption.

[A]

Yeah. And that's not fact. That's just the U.S. right. That's not factoring in every other country that's also going to do it. And those that don't have strategic reserves, stop mandating them.

[B]

Exactly. So I think again we need to see what, what the tally is at the end of this bit. But I think you're looking at a few years of really strong demand growth just because we need to bring stocks back. And this is not all price sensitive. Some of this stuff is mandated. So it will just happen. So that means that I kind of need to see a supply response. Otherwise the market is quite tight towards the back end of the year. So then the question is, where does the supply come from? I think you mentioned OPEC already, but you're probably still looking at potentially more supply of opec. Saudi Arabia still has spare capacity. UE went out. Well, they went out to produce more. So they probably are willing to supply into the market. US can probably grow, but I'm not sure by how much. Maybe Brazil extra fp, ISO, but then you're kind of done. So I'm looking at the structurally tight market. I don't think I want to be anywhere below an eight handle for 27.

[A]

Yeah. Which is answering every, every Texas oil man's dreams. But. And then presumably, and this is, this is sort of was Doomberg's point, you know, at some point in 2030, you probably won't be able to get rid of the stuff for free, you know, because you'll have so much of this narrative and the risks playing out that this will be a big shot in the arm for exploration as well, I assume. And as all things in these markets, you go back to a structural oversupply, especially if you've got those other drivers in place, which let's assume coming out of this is going to be domestic renewables, nuclear power, even God forbid, for the environment, coal. But we possibly see a relaxation of, or a delay in global climate goals as a result of this. As security now outweighs everything, even cost. But certainly sustainability attributes. The AI power demand story. But that could be disrupted by quantum computing. There's plenty of spanners that can be thrown into that. Someone can just make a more efficient chip. Right. And they are going to solve for power demand because you can't also compete with, you know, with the domestic polities, power prices going up. So you can see all of these things converge in the 2000 and 30s and suddenly, you know, again, it's just volatility. Right. The world could earn a dime, become very oversupplied.

[B]

Yeah, look, it's, it's fair enough. All the examples you gave, or the majority of them are power. Right. So which makes it more a guest story than an oil story because all the years, nuclear, renewables, it's, it's a guest story. It basically reduces the gas load and power. So I agree with you. But the way I look at it in terms of the whatever end of decade, early 30s, the slope is down. So you have a lower growth slope for both oil and for gas. I think for oil it's more Electrification of still of transport that might accelerate, which actually is kind of in line with decarbonization targets. In that sense, it's a good thing. But you have other sectors in both markets, both oil and gas, that are much harder to diversify. Look, heavy duty transport is still going to be difficult. Ships, right. Planes, it's still going to be difficult to do. Heavy industry or high heat industry is also difficult to see the gas phase out very quickly. So I do agree with the narrative. I don't think it kinks the curve. I think it reduces the slope. You probably still have an upward trajectory for a fair bit of time because the hard to abate sectors are still hard to abate. It's still difficult to take the fossils out of those sectors. It will become more attractive to do so, but it also needs a bit of time before you can really go there. We might be at risk of overdoing the demand response, but for the rest, I agree there is a lower slope for demand and there's probably more upside to production. So in the end that does lengthen your market further out. Early 30s versus where you would have had it before the war. That for me is clear of the two. Oil.

[A]

You're a physical oil trader or you're a physical gas trader? LNG trader. It would seem to me that oil is obviously the natural focus. It's much more understood. It's much more weaved into every economic talking head on the radio, et cetera. Is LNG the more fragile, more challenging, more stark story of what's going on at the moment? Because of the nature of the infrastructure, the nature of the fragility of it, you've got who is going to continue to invest in trains out of Qatar, which was the big sort of glut story. Lots of the world's economy is rewired to LNG in the wake of getting rid of nuclear. Thinking about, particularly in Asia, is that the story perhaps that has the more consequential volatility impact and challenges for your clients?

[B]

Yeah, it's a good question. And the annoying answer will be it depends. So it depends on your time frame. So if I look at the very near term. So like the next couple of months might maybe one or two quarters ahead. Yeah, I agree. I think it's more of a gas risk than an oil risk. And the reason is that part of our discussion so far has been on offsets for oil. We have pipeline diversions, we have SPR barrels, all that stuff. It's not enough, but it does help, right? It's better than nothing. I don't have this for gas. So I have structurally very, very limited offsets in the LNG market and much more limited than in oil. So that makes, I think the argument is structurally on a prolonged outage. That is, if we're done with kind of the seasonal buffer we have for gas, I think gas should probably be more at risk than oil. That's point one. Point two. We're partly already seeing it in the market because if I look at prices now, before I came into this chat we were in a high 40s for TTF. Pre war TTF would have been at 25 because it was quite a bearish market. So we've doubled effectively in TTF oil we haven't quite doubled. So you kind of start seeing already I think kind of an impact. So short term, near term, yes. I think gas is more at risk than oil because of lack of offsets. Longer term it's opposite because if I look longer term and that's really beyond 27, let's say I go to 28, 29. I think the narrative for LNG being a long market is still very much there, just pushed out. A lot of people were expecting 27 to be pretty long already in terms of all the new supplies that's coming on, including Qatar. That would kind of overwhelm demand and prices go down, blah, blah. That's true. That's not probably going to happen now in 27 because we've lost so much out of qatar. But in 28 I still see so much US LNG coming into the market. You're probably still there. So in the longer term I think the market dynamics in LNG will still be pretty bearish actually towards the back end of the decade. So that makes it less, less risky to structural supply risks. Oil doesn't have that. Oil is probably opposite. We need to look for supply to feed the demand that is still growing. So it's. It inverts short term, yes. Gas, long term, probably oil.

[A]

And then final question and while we've got you, there is, and I'm sure all of us have this right and I, I myself am participating in it.

[B]

Right.

[A]

We're all sort of become like you are the expert, the rest of us are sort of on various chats and seeing all this stuff floating around and you know, everyone's become an analyst of, of Middle Eastern politics and missile capabilities and again, I'm laughing at myself. Is there anything that you kind of cut through this chaff with and say like these are the consequential I'm looking for these couple of elements each day. I'll give you an example. Right. So obviously missiles start firing again. I'm really thinking about where those missiles are landing. I'm really looking out for like, you know, is that when you sort of wake up or you're thinking about this with all this noise out there, what are the one or two things that you think are sort of the real consequential elements that if they happen, this kind of thing?

[B]

Yeah, yeah, okay. Yeah, that's a good question. So indeed to this there's enough noise. The one thing I look at is very much where I started in the beginning is that I said basically pain goes up. But I still believe there is a negotiated settlement somewhere at the end of Q2, early Q3.

[A]

Right.

[B]

That's the base case. That means the one thing I look at is negotiating positions. So if we keep exchanging current red lines that are mutually exclusive, there is no deal. So the main thing I look at is there actually a shift into negotiating positions that make me think a negotiated settlement is possible. Without that, it's not going to happen. So that's for me, the key one that's trying, what I'm trying to glean, I suppose, through all the headlines. That's point one, the other one. Yeah, stocks. Right. Because I mean, it's part of the oil. And the oil story has been we're down to onshore stock draws, which is kind of a last thing. We can track that. At least there's data. If we get EAA data, we can track how much stocks are drawing and which stocks are drawing, which is important. Is it products? Is it jet, diesel or brand? That is by far the biggest data source I'm looking at over the next few months. That's oil. Point three storage injections in Eurogas. As I said, I don't think they're going to ratchet up anytime soon. Which makes me worried about the end of Q2 early Q3 story. If I'm wrong on that, I can see that because that stuff is being tracked pretty well. Those three are for me, the most important signposts. Most of the other things is kind of not noise but secondary order impact.

[A]

Yeah. Out of interest, because you kind of alluded to this earlier on, do you think when you see that first major participant buying gas at the $40 mark sometime this summer that then creates a wave of others making that plunge? It's more the moment you just don't want to be that first person to sort of, you know.

[B]

Yeah, probably. I mean, there is an element of that, I think the bigger drive towards, how should I put it, towards significant storage buying. Again, I can't get around this having to be mandated in northwestern Europe. So if that happens, I mean, storage operator, they will just have to do it. So I think that's the bigger thing. It's usually also a bit of a lambing story. If one does it, other people will do it. But unless we get clear direction on the crisis, I think this will be a trickle because you can always make the argument it's probably going to be. It might be better in one month's time. So I think that's low. I think it's the mandated part of the story that we need to start seeing unless we get a pretty strong evidence on a negotiated settlement and a resumption of flows.

[A]

Well, fantastic. And I don't know if you want to say a word or two about when people should reach out to you and your team for your fantastic analysis.

[B]

Well, I mean, whenever I suppose they have a question or query they think we are better suited to answer because we're always, we're always happy to engage. We learn ourselves as well from these kind of discussions. So I'm always happy to engage. And every day is a new adventure, it seems, in this market.

[A]

Exactly. Well, Aldo, it's been way too long since we've had you back on. I've really enjoyed the that. And you've actually given some concrete insight and food for thought on this and given us some interesting timelines to have in the back of our heads. Yeah. Appreciate you coming on.

[B]

Yeah. Thank you very much. Thanks for hosting me.

[A]

Thank you for listening. To find out more about HC Group, our global offices and our expertise in search within the commodities sector, please visit ww.hcgroup global.