A (7:18)

That's the narrative, right, isn't it? It's this, irrespective of where the tariffs end up, the damage has been done in introducing a new risk to the market. And I guess this is your commodity lens on they are absolutely inflationary. And that was, you know, we're about to do an episode on coffee that was absolutely admitted by the fact that the first, when, when affordability became a, a new word that Trump claims he does is a hoax. You know, it was, they immediately rolled back the tariffs on coffee. But nonetheless the, the damage is done in terms of the suppliers have been put out of business or have had terrible years, et cetera, the risk premium now required to do any kind of trade and the kind of that disruption of the ever marching sort of free market. So you can see the longer term effects of this being potentially a dampener and certainly just a new level of risk that may be quite good for commodity traders but is not good for the broader economy.

B (8:14)

I think so. I think that's absolutely right. And you know, yes, so far so good for global trade, but I think, you know, it's going to make itself felt in 2026, both in terms of overall levels of merchandise trade, including commodity trade, and also in terms of the price impacts. Because so far, to a large extent, you know, it's been suppliers and companies that have absorbed some of those incremental costs and not so much the consumer. And as you say, in light of the recent elections in the US and the problems that the Republicans had with cost of living, they rode back on foodstuffs and fertilizer tariffs. And we may well see a little bit more of that rowing back on the current level of tariffs going forward. But it's going to be a headwind to global trade and underlying demand in the global economy, even if we get slightly lower levels of effective tariff compared to the 17 or 18% average that the US is currently carrying.

A (9:25)

Hmm. That brings us nicely to the other big narrative or the next narrative in our set list here for the 25 and 26 greatest hits is kind of this macro picture, which is, you know, you ultimately ask your question, where would we be without an AI bubble or AI and what it's done, you know, against this backdrop of, you know, we started the year and Republicans were quite rightly, in my opinion, very, very exercised over the deficit and the existential threat that posed to the US economy and what that meant for the US Dollar. Actually, deficits continue to increase. Whatever tariffs, you know, revenue that's raised, that's going to be given to farmers and all the rest of it all handed out in, in $2,500 checks. But yeah, it does. You know, the big thing has been this AI that is really the Magnificent seven, you know, whatever. It's the Wonderful four, you know, that has kept the S and P marching forward. And so I know there's a lot in there. Can you talk about that macro picture?

B (10:26)

Yeah, no, exactly. And, you know, I think generally speaking, US Economic performance has been considerably stronger than people thought it was going to be probably in the early part of the year. But it's been a very uneven picture. And obviously equity markets have remained relatively strong. There was a bit of a blip back in April at the time of the initial introduction of tariffs. You know, the first seven months of the year, there was a sense that we were getting a bit of an exodus from U.S. assets. We had, you know, volatility in the bond markets. We had a bit of a dip in equity markets briefly. But, you know, crucially, we had a sell off of the US dollar in the first six or seven months, months of 2025, essentially it lost 10% of its value, but it's really sort of rebounded a little bit. And I think the danger going forward is that the deficit story hasn't gone away. And despite the revenues that the US Is accruing via trade tariffs, there's still a fairly loose fiscal policy at work out there. There is still a risk that markets take fright over the broader picture in terms of U.S. assets and that we get a sort of a renewed exodus either out of the bond market or out of the dollar or out of both. The one thing that I think I would probably take comfort from in terms of the resilience of the US dollar, is its performance since the middle of 2025. And it's been much more resilient in, in the period really since July, to a certain extent. The second point is that if we think tariffs ultimately next year are going to be inflationary, that suggests to me that the Federal Reserve is going to have to be a little bit cautious in terms of the pace at which it cuts interest rates. And that on its own could be a little bit supportive of the dollar in 2026. So this narrative that the dollar is only going to head in one direction, I think is probably not as clear cut as the market, at least in the early part of 2025 was talking about. But it does leave us with this issue. You know, equities have really blazed ahead. It's very much been based on and the resilience of consumer spending, which of course is sort of two thirds of us. And it's very much been that, you know, the upper quartiles of the US Population.

A (13:19)

Who's benefited from this is the K economy, right? Where we've seen this massive divergence in if you've got assets, you're doing well. If you don't, you're having a shocker.

B (13:29)

Now what happens. And you know, our base case is that we do not get a mass exodus from US assets in 2026, and we don't see a bursting of the AI bubble, but it is a tail risk already. The November consumer spending number came in a little bit softer, I think in real terms, still up by 2, 2.1% year on year, but that is the slowest in a couple of years. And so obviously there's a risk there that assets in the equity markets are overvalued. So we've got to keep which they are historically.

A (14:07)

Right. I mean, there's a couple of everyone. I sort of, maybe it's just my time of life, but kind of, you know, early mid-40s, mid-40s, you know, where I'm kind of like, you know, just expecting that this thing's, you know, going to collapse because it looks massively overpriced. There's so many risks out there. You've also got. At the moment, we're obviously expecting a new Fed chair coming up with incredible political pressure to drop interest rates at a time when essentially they're normalized for the long term, which is a good thing for the economy and asset allocate. I mean, it just seems like there's a lot out there that kind of, you know, and again, it all begs the question, without AI, it would be a very different picture that that sort of OpenAI money is sloshing around a few companies with billion hundreds of billions of dollars worth of commitments. Yeah, that, that seems the essential risk. And that plays directly into the energy markets where, yes, sure, renewables have had a rough Year. But power markets in general are being driven by this data center narrative. We've covered it multiple times. Yeah, that's under threat from a couple right angles. One is that you don't, you don't suddenly with just the bubble bursts on AI, potentially the use cases just don't point to that. You know, just the incredible expectation of revenue it can drive. Or secondly, some come someone comes up with a chip that uses 5% of the power that it currently requires and that energy narrative goes away. I mean there's a lot riding on kind of this one or two stories which seems relatively fragile compared to a much broader economic wave.

B (15:37)

Yeah, no, I mean we would put it as a non negligible risk that there is a fundamental weakening of the sort of tech story that has been driving so much of U.S. consumer spending. And as you say, it's feed through into the energy markets, not least power and natural gas markets going, going forward. And you know, maybe we can talk a little bit about, about natural gas because we have an interesting dichotomy there. You know, you have AI and the build out of data centers in the US which net net should be pretty supportive of demand for natural gas. And you've also got this build out on the Gulf coast of all this new LNG capacity. So all other things being equal, we're talking about a fairly supportive environment for US natural gas prices, assuming this is not an AI bubble that is about to burst. But it contrasts quite starkly with what we might see for natural gas prices in the rest of the world.

A (16:46)

And natural gas and LNG is number five on our set list. So we will come back to it. And you presaged it. Well, just a couple of other. On that macro thing, we were in danger of just talking the US they have been the consequential country this year in terms of driving a lot of global narratives. I want to talk about China, but where's the European picture in this? How has Europe fared in 2025? With a bit of an energy lens. But what's the European economic outlook looking like?

B (17:15)

I think it looks pretty grim, quite frankly. And Europe is still grappling with the aftermath of 2022 and the surge in energy prices. It does seem to be trying to definitively turn its back on Russian supplies, both of natural gas and you know, refined products derived from Russian crude. And you know, it really is a conundrum that Europe faces going forward. It's talking about loosening its overall reliance on hydrocarbons and specifically on Russian hydrocarbons. And yet public finance available to develop clean energy at the pace at which European Commission and individual European governments want to proceed. Obviously, public budgets after the pandemic and the war in Ukraine are strained, to put it mildly. So we have really, Europe as the economic laggard, not only in 2025, but going through 2026. And, and I think we're looking at 1% or below 1% in terms of anticipated GDP growth. And obviously it's about energy prices and it's about productivity and the absence of productivity gains amid a rapidly aging population. And deindustrialization is the watchword at the moment.

A (18:50)

Yeah, it's quite. I mean, obviously, I guess I'm most familiar through the lens of what we're seeing in the uk, but it sounds like that's systemic and structural in that there's just not the growth there to support the increase in entitlement costs that they're facing. And you've got, you know, Exchequers and Treasuries around the. In real trouble trying to balance that. I mean, is. Is there any sense that a corner has been turned and you've got some. Some areas of investment in. Into obviously, defense spending. You are seeing perhaps a less, well, more open energy policy, and it's kind of all of the above, rather than just renewable. Or is it just sort of. I mean. Yeah, it seems pretty frustrating over there.

B (19:34)

I think, you know, the issue is we tend to look at Europe as a monolithic whole, and of course, there are subtly different strands of priority in terms of energy mix and so on. I mean, the skeptic in me would say that while Europe seems to be taking a fairly unified stand against ever going back to any degree of reliance on Russian energy. I mean, I do wonder, going forward, if there is some sort of ceasefire achieved in Ukraine, whether there isn't a risk of some fragmentation. I mean, there will be some, I suspect, some hardline opposition to widespread imports of energy from Russia, again from certain states. But you look at Germany in particular, whose whole industrial infrastructure was built on access to cheap Russian natural gas in particular, and to say just ad infinitum, that is never going to be a part of the German energy mix going forward. Whatever happens in terms of the war in Ukraine, I think is a bit of a step too far to assume that that is necessarily going to be the situation over the medium term. So I think there's going to have to be a bit of compromise in Europe on a. The very hard stand they've taken in terms of renewables. I think they're going to have to probably broaden their view of the energy basket. Nuclear is going to be part of that. I think some softening of the sort of phase out of hydrocarbons may have to be considered and who knows, there may be some space once a peace deal is reached in Ukraine, probably at a spot level for Russian hydrocarbons once again in Europe. I'm not sure signing up to long term 20 year gas contracts is likely to take place but I think it's very dangerous to sort of say never say never again. You know, looking forward.

A (21:42)

Well especially considering the sort of these, you know, the gerontocracy around the world and the consequential countries. Right. All the leaders are over 70, you know and so there will be, there will be changes coming up especially sort of, you know, it doesn't seem like the, well, this isn't the place for it. But the Ukraine, Russia's invasion of Ukraine doesn't seem to be going anywhere particularly fast. Right. That certainly doesn't look like it's going to change in 2026 or I'd be very surprised.

B (22:08)

No, I think the working assumption would be a sort of slow ongoing grind in that conflict. Tragically, at some stage the Russian economy hits up against some buffers. I mean they had in 2022 and 2023 sort of 4% growth. Most people expect a fairly sharp slowdown.

A (22:30)

In the Russian economy especially with oil at 60 bucks. Right. Or an inflation, inflation adjusted 40 bucks.

B (22:36)

Revenues are down by sort of 22% in the first 11 months of 2025 and they're likely to continue weakening into the early part of 2026. They've still got relatively high levels of inflation. They've still got double digit interest rates. So non military, the non military part of the Russian economy is really struggling now. They've got relatively low levels of debt and so you know, they're not going to hit the buffers straight away and they can carry on financing this conflict for the short term but at one stage or another going forward it's going to become more of an issue and.

A (23:19)

Especially if sort of the promises made on you know, joining signing bonuses in the tragic case of death, you know, death bonuses or the correct phrases, if those things don't start not getting paid then the Russian mothers, the famous Russian mothers might accelerate the discontent in those regions. But yeah, it's, yeah, it looks like it's a grinding terrible business.

B (23:45)

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A (24:18)

Learn more@encoinsights.com okay, so Europe having a toughie, continuing to do so and as you say, is in a series of binds. The China story and I think this is spend some time on this because this time last year, I think the energy world was slightly shocked by just how far crude buying had dropped off this sort of the penetration of EVs and potentially hitting that tipping point. This year that might be the same case. It might be hidden by their SPR buying, which is another slight cause for concern given the volumes that they're sucking up. We just covered that on last week's episode. But where's the macro picture with China? And then can you give us some of the sort of the things to look out for in 26 or what stories continue into 26?

B (25:11)

Yeah, I mean, the bottom line is the domestic demand within China is incredibly weak. It's all centered around this sort of post pandemic period and essentially four years of tightening liquidity in the property sector in China. And the property sector is, is, as you know, hugely important in China. It accounts for about 25% of Chinese GDP. It's, you know, the key source of finance for, for local government is sort of selling off land for property development. And it's worth bearing in mind that, you know, about 60% of Chinese savings are tied up in the real estate sector. And this is a sector that for the last four years has been sort of starved of funding. The Chinese government was very concerned about the bubble that was developing within the property sector. And therefore, you know, they've tightened the reins in terms of finance financing for the property market. The trouble with that, of course, is it has spooked the Chinese consumer who essentially is very worried about spending money when the repository of 60% of their savings is essentially in decline. And so domestic demand in China is very weak. China itself is facing deflationary pressures, unlike some of the inflationary pressures we talked about for the US and so what it essentially needs is stimulus from Beijing. The trouble is that again, Beijing doesn't want to just turn on the fire hose and is being fairly judicious in its use of stimulus. They've been helped a little bit by the weakness that we've seen Overall in the dollar in 2025, there's been a little bit of monetary stimulus and cheap Russian energy.

A (27:17)

Right.

B (27:18)

They've had access to cheap Russian energy. But the focus, I think has very much been fiscal stimulus funneled towards particularly high tech manufacturing. And the old savior of the Chinese economy, which they are trying to move away from, which is dependence on exports. And, you know, you're tempted to say, well, hang on a minute, with all these tariffs being deployed by the US on China, how can it be exporting its way out of problems? Well, you know, overall levels of exports out of China into the US are off by sort of 15 to 20% this year, not surprisingly because of tariffs. But taking, you know, all other areas of the world, China's exports are up by, you know, something around 10 to 15%.

A (28:13)

Which is, which is suggesting, I mean, that's also, you know, if you follow that EV story, right, this sort of unsold fields and fields of byds and so forth, EVs, Chinese EVs in China that are getting dumped on the European, you know, other markets.

B (28:28)

Right.

A (28:28)

So that you can't also carry on that level of concentration of exports without being some pushback is certainly from Europe.

B (28:35)

I think that's right. I mean, we're already seeing it from Europe and I think we're, we're beginning to see some alarm bells ringing, particularly among manufacturers in, in Southeast Asia. I hesitate to use the word dumping, but, you know, there is a, a feeling that, you know, some of the deflationary pressures evident within China are now being exported to some of its regional neighbors and the manufacturing sectors they're in. So, yes, at some stage that's going to hit, hit up against limits to a certain extent. And I think, you know, I think the, the authorities in Beijing are aware of that and they're trying to tread a fairly fine line. But the key thing for them is that they have to avoid a deflationary spiral domestically. They have to pump in enough stimulus to, to try and meet some of their growth targets. Is that 4% GDP growth? Is it 5%? I mean, we would see structurally growth in China slowing probably towards something closer to 4% over the next couple of years. There's a lot of question marks about whether 4 or 5% is in any case a realistic characterization of what's happening with the Chinese economy. But having said all that and having talked about all the headwinds that the Chinese economy faces, actually commodity import demand into China, it's been patchy, but, you know, it's not been bad. You know, crude oil Imports this year are probably up by around 400,000 barrels per day compared to 2024 in the first 11 months of the year. Copper imports are up by about 6% year on year. Iron ore, which of course is the biggest single commodity import into China, is up by 1 or 2% year on year. Certainly coal imports have been down. Natural gas imports have been down this year. But you know, it's been a sort of mixed picture. And our view, I think would be that because China is building about another 100 million barrels new storage capacity for crude, we could quite easily see a continuation of the elevated levels of crude oil imports that we've seen in 2025. And we think some of that will continue into 2026. So it's not necessarily very strong domestic refined products demand in China. It's much more purchasing of crude to fill storage, commercial storage last year or this, this year, and much more spr filling in 2026.

A (31:36)

I mean, it's difficult, right, because firstly, you have an increasingly managed economy, right, I think, you know, over the, since under Xi's tenure and an increasingly managed message externally, you know, and maybe this is just my impression, but I would suggest that like you, both those things are, are true and you do face some like real challenges in the real economy. You have really high youth unemployment, especially among graduates. You have over capacity in sort of chosen industries of success. And you can argue that's where you see that commodity. But you could say the copper store is real because of the amount of electrification that's going on. You could argue though that the crude and product story, particularly sort of, I guess the crude and the sort of NGLs ethane, you know, that's all to do with one is to do with that SPR buying and you know, who knows what that heralds. And the second one is obviously they put build an incredible amount of an enormous petrochemical industry that requires a whole bunch of ethane and all the rest of it that, you know, that essentially this is kind of the economics don't apply. They're going to be buying it anyway as part of a strategic governmental plan. So I don't know, I think those two things, I don't know if you agree with that analysis, but it seems like it's quite hard to point to real world economics driving that commodity buying.

B (33:04)

No, absolutely. And you know, we sit here in Europe or North America and we look at, you know, for many years we've been looking at the Chinese refining system and say, you know, they've got way too much capacity for domestic demand. They're not, they've stated they don't want to flood the market, the global market with refined products. But why don't they rationalize refining capacity? And of course one of the reasons is, you know, employment and stability and we're, we're getting to the same stage. I think with their petrochemical capacity they've built a number of world scale massive, you know, units which raises question marks over some of the older capacity within China. But again, logically speaking, economically speaking there would be rationalization of that capacity, but rationalization of the capacity would mean unemployment and that's something that they're desperate to try and avoid. So yes, there is a sort of disconnect from real world economics, if I can put it like that, in the name of social stability, which above all else is the must have for the authorities in Beijing.

A (34:19)

Yeah, and God help you if you're an industry that competes with the Chinese state like the petrochemical industry, which has had a, a shocker in 2025. Right. I mean it, it comes back again to obviously what's been driving politics under the Trump administration and not, you know, some of it's very sound in terms of what's, what's been going on. Yeah, I know I sound a bit of a China skeptic always, but it, it sort of seems to be that you can carry on doing that but you're, you're storing up a hell of a lot of debt and a lot of that is somewhat hidden and the message is, is very much managed. But anyway, the other, the other analysis, obviously we have Kings Mill Bond on mid last year saying look, actually this is all a very rational plan and they're winning the energy transition. They're doing it far faster, far greater scale than anyone else. And yes, it means pain in the short term, but in the long term they're going to have essentially free energy and hold the keys to the technology of the future.

B (35:11)

Look, the statistic that I always churn out when people ask about that is, you know, just look at renewable generation capacity and you know, they are installing each and every year double the amount of renewable generation capacity compared to the rest of the world put together. You know, so I mean it's just mind, it's mind boggling what they're achieving there. And you know, of course the irony that has been discussed before while at the same time they continue to add new coal fired generation capacity as well. So it's a mixed picture in terms of sustainability, but there's no doubt that they have just stolen a march on the rest of the world in terms of, of renewable capacity additions.

A (36:00)

Yeah. And it's not also, I mean, again, it's another old narrative, but, you know, it's not really about sustainability either. Right. Because you've got massive pollution as a result of, you know, the being the world's sort of battery manufacturer. This installed solar capacity is, if you read some reports, is having a huge impact on deforestation and, and, and all the rest of it. So it's. Yeah, it's. I find China infinitely fas. Okay, so. But it does. Talking of over capacity, there's a segue for you. It'd be great to talk sort of OPEC and kind of your take on, on how they've navigated 2025 where, you know, stating in late 2024 about opening the spigots and you know, what, if anything, you see for the. For 2026.

B (36:47)

Yeah. And I think the jury is really out. You know, there's two schools of thought which are sort of mutually exclusive. If you look at their plan to fully unwind the production cuts that have been in place since 2022, you know, they scrambled to react to the pandemic and indeed there were indications of a price war in early 2020, but eventually they stitched together a deal. And I sort of feel that that gives us a clue as to what we might see in 2026. Our numbers here at Argus, Argus Consulting forecasts say if they continue to unwind the production cuts as they've been doing, and that runs all the way through 2026, you know, there's quite easily 2 billion barrels per day plus of surplus on the global market. The reason for that is subdued demand growth. We've got about a million barrels a day of demand growth expected for next year. We've got about a million and a half barrels per day of incremental supply coming out of Brazil, Guyana, Canada, a number of other non OPEC sources, largely in the Americas. And therefore, the unwinding of the production cuts on top of that non OPEC supply growth generates, we think, a surplus of 2 million barrels per day or so in the market. Now, how does OPEC plus react? Do they say, okay, the gloves are off and we're prepared to tolerate prices of, you know, certainly sub dollar fifty a barrel or maybe even sub dollar forty a barrel for a sustained period of time? You know, there is a school of thought that says that they've had enough of shouldering the burden of curtailing supply and losing market share, and therefore they're just going to let prices drop and stay very low for a sustained period.

A (39:00)

Of time, which inflation adjusted would be like in the teens. Right. I mean, that's an extraordinary low price.

B (39:06)

Our view here is that although they may be prepared to spook the market and allow prices to fall for a brief period of time in the first half of 2026, history tells us, and of course it's very dangerous to solely rely on historical precedent. But I think from a financial standpoint, they don't want to endure six months or more of very, very low levels of prices. And therefore they will ultimately stitch together a new deal that actually ends up with them cutting supply going forward in 2026. And therefore we don't see this 2 million barrels per day plus of surplus emerging on the market. You know, there's the old adage that, you know, and it's at sort of cliche level, but that, you know, OPEC or OPEC is like a teabag. It only properly works when it's in very, very hot water. Well, 2026 begins to look like very hot water for OPEC. And therefore our assumption is that they will react and that they will curtail supply once again. And the fact that they are grappling with very thorny issue of production capacity says that they realize this is a problem not just for 2026, but indeed for 2027 and indeed potentially even into 2028. And our numbers in terms of relatively anemic, a million barrel per day or less demand growth over the next two to three years and a little bit of a bubble of non OPEC supply growth of north of a million barrels per day between now and sort of 2028, it says there's really very little upside in terms of OPEC for an ability to raise supply not only in 2026 but also in 2027. Now you can say, well, why should they tolerate that on a continued basis going forward? And the answer is that it's not in their interests to encourage a price collapse that lasts for 6 12, 18 months. And their domestic spending requirements are such that they want to try and avoid.

A (41:39)

That, they've got to meet their own budgets.

B (41:42)

Yeah, yeah.

A (41:43)

And they've got some expensive tabs to cover. Right?

B (41:46)

Exactly.

A (41:47)

Recent investments.

B (41:48)

Exactly. Now if you disbelieve that, if you say historical precedent be damned, and the Saudis have had enough of this and they want to teach overproducers whether it's within the Middle Eastern Gulf or whether it's Russia or whatever, or Iraq, you know, if they want to teach them a lesson, then you'd have to be a lot more bearish in your prognosis for prices in 2026. We have a fairly although we would envisage a temporary downward shift in prices before they begin to react. You know, we've got prices still with a six in front of them as an average in 2026, but we're perfectly prepared to accept that there's downward risk to that sort of price level.

A (42:37)

Hello, I'm David Hunt, founder and Managing Director at Hyperion Search. Founded over a decade ago, Hyperion Search has helped organizations from major utilities to startups recruit their leadership teams and key individual contributors to accelerate both their growth and the energy transition. Our three main verticals are renewable power, energy storage and E mobility. The energy transition and the talent that delivers it has been our passion since day one. To find out more, visit hyperionsearch.com or listen to my Leaders in Clean Tech podcast, available on all platforms. What about that narrative? I think that there's sort of a consensus, I would agree on that 2026. What about that narrative around this big burgeoning gap of non OPEC investment into maintaining reserves and production levels that might sort of come through in the latter half of this decade and suddenly you see a surprise to the upside when actually there is this sort of the IEA talks of this $500 billion gap. You know, private companies talk about a much higher one. Is there anything to that? Or is that sort of keeping everyone cheery for their Christmas parties in the oil companies?

B (43:49)

I think there is an element of truth in it and I think the big sort of alarm bell that's ringing out there is the sort of downturn in exploration spending. What we've seen from the US shale patch in particular is that wells drilled and dollars spent. We're in a completely different world than we were a decade ago in terms of how much do you need to spend to maintain productive capability. What I think is a lot more problematic is the, you know, the collapse in exploration spend. And at the moment we've got a sort of two to three year window of projects that are in the pipeline and coming to fruition largely in the Americas, but a bit offshore Africa, a little bit in the Norwegian Shelf as well. And we're not expecting US shale to fall off a cliff. We think the big growth phase of US shale production is probably behind us, but it's going to be a sort of 4 million barrel per day exporting country for the foreseeable future. But what I would be more concerned about is sort of post 2028 and into the early 2000 and 30s when you start seeing decline rates kicking in and more of an issue. And at that stage we've got to find new sources of oil to replace that. And, you know, it doesn't matter. You know, the IEA got itself in a tangle with its narrative that if we're on a net zero trajectory for oil demand, then you don't need to spend any more in terms of upstream oil and gas investment. The simple reality is we are not on a net zero trajectory for oil demand and therefore we have to keep spending hundreds of billions of dollars a year to sustain productive capacity. So get beyond 2028 and I think there is a real question mark about non OPEC supply and it's then that OPEC producers will begin to reclaim market share. But we still probably need to up our game in terms of spending on exploration and new developments post 2030.

A (46:15)

It's challenging, right? I mean, there's, you see massive consolidation, particularly in the offshore space. There is obviously the worry about shale and that turning over more quickly than expected. There's also a talent challenge as well. I mean, you know, the offshore oil exploration world my wife is in, it hasn't been attracting young juniors for the last decade. And you've got a retirement cliff that's going on right now. Yeah, so it's quite a, you know, there's an episode there and I'll, I'll get someone on to talk about it, but. Okay, so then I guess that, that leads us into this. Talking of sort of tidal waves and cliffs and stuff, there's, there's a hell of a lot of LNG forecaster to come on the market. And you've already alluded to there's a good natural gas story out there as it's only in the us but how is that world poised? I mean, it's been lucky for Europe that, you know, a free market, a global natural gas market has come to its aid since 2022, allowing Germany to, to remove itself from Russian cheap Russian gas, as you mentioned earlier.

B (47:20)

Yeah, we've got this a little bit akin to the sort of the bubble in terms of non OPEC oil supply growth. You know, we've got this 6, 7 8% annual growth in new LNG capacity in 25, 26, 27. And that compares with, you know, pretty depressed levels of supply capacity growth over the last sort of, you know, three to four years preceding 2025. And of course it's, it's overwhelmingly centered on the, on the US Gulf Coast. But you know, it's not just there. There is other capacity in, you know, sub Saharan Africa, parts of Latin America, and of course, you know, the dark horse, if I can put it like that, but expansion also that will funnel supplies into Asia from Qatar and the Northfield expansion there. So yes, I mean, I think our expectation would be that, you know, in a sense Europe is trying to wean itself off its last remaining reliance on Russian supply, both pipeline and lng. But it's only able to countenance doing that because of this growth in supply that we expect over the period between now and 2028. And of course the big thing here is that unlike in oil, we don't have an OPEC or an OPEC in terms of restraining supply to the market. And so really the only way you see surplus in certainly the Atlantic Basin natural gas market being contained is via the mechanism of price. And so we have an expectation that on a dollars a million BTU basis, we're likely to see sort of TTF prices in Europe falling from a current level of between 11 and $12amillion BTU, much closer to something with sort of $8amillion BTU, which is starting to get to a sort of netback level of sort of break even for exports from the US Gulf Coast. So it raises all sorts of questions about how much of that US capacity will be encouraged to come on stream on the original schedule if some of the offtake prices are going to be relatively depressed, which would look very bleak.

A (50:02)

Indeed if the AI data center narrative doesn't play out quite with the level of froth that is expected. Right. I mean, just from a US natural gas price, I mean, be great for my energy bill, but it wouldn't be great for the economy.

B (50:17)

Yeah. So I mean, if you've got a continued expansion in terms of data centers and you've got all of this new Gulf Coast LNG capacity coming on stream, that should be very supportive of Henry Hub prices going forward. But as you say, it only takes one or both of those underlying assumptions to turn out a little weaker than expected. And that wellhead price may be any uptick in wellhead prices might be a little bit shorter lived.

A (50:51)

And it's fair to say it's been a torrid year in natural gas for traders. Right. I mean you sort of, they've seemed to have had the worst of it. Crude was a pretty rough year, certainly the first half of the year. Products guys have been having, you know, great fun and so are the metals guys. But yeah, Natural gas. I mean, there's been some alleged horror stories out there in terms of performance and ties directly to that lowering prices narrative.

B (51:14)

It's been exacerbated by a number of things. I mean, you know, this, we've had, we've had a very mild winter so far in Europe. We've had more wind power supply. So gas demand has been weaker in Europe. Asian demand has been weak because it struggled to compete with very cheap coal. Going forward, you know, there is a huge question mark about, you know, the appetite for massive expansion in LNG into the Asia Pacific. And again, you know, it's about India, it's about China, it's about Thailand going forward. And it will be driven by price. The Asian consumer is always incredibly price sensitive. And so it's about how cheaply can, you know, Gattari gas can be delivered pretty cheaply into Asia. So we would expect there to be fairly sizable expansion in demand in the Asia Pacific region going forward. But that Asian consumer will remain very price sensitive. There's no doubt about that.

A (52:20)

It seems. And we're going to talk, we're sort of, let's park, we're talking copper next. That's our final, that's number six on our set list. And that electrification story and copper certainly had an interesting ride this year. And once again I failed to capture it by selling all my copper indexes about three weeks before they shot up, which is, you know, I mean, I've, that'd be great as a sort of negative indicator for markets. But you know, the, I guess one of the narratives that's kind of creeping out there, right, is this already I've sort of, you know, you're hearing a little bit about, oh, you know, we're in the foothills of another super cycle and, and so forth. But when I step back, this feels a lot like 2014 in some ways. Right. We've had a period of big run up in commodity prices, lots of volatility and now we're in the sort of, the market has done its job. You've got supply coming online, lots of crude coming through or lots of capacity there, lots of, you know, natural gas. You know, it's typical good old commodity cycle. And at the same time, you know, in this instance, there's pretty strong macroeconomic headwinds that would, you know, Europe's in recession or, you know, there or thereabouts. And certainly the US is looking pretty, pretty rough and China's, you know, rough. I mean, it, it doesn't, it doesn't seem to me, I mean, There's a reasonable setup here where certainly I don't think there's a super cycle coming in energy and there's a reasonable setup that next year is much the same of kind of low energy prices in general. Maybe there's some bright spots around products because of what's going on in refining. But it, I don't know, it doesn't, doesn't quite feel like, oh, you know, 2026 is going to be. We're back at it. I know there's, we're about to have an episode with another guest who argues differently. But to me it doesn't seem particularly like a fantastic year. I don't know.

B (54:05)

Well, you know, I would look at, you know, we've said that there's a risk of oversupply we think in 2026, both for crude and for nat gas going forward. I think I'd probably remain a little bit more optimistic in terms of the metals complex. And you know, we're getting. We've already had signs of that. Copper's flirting with $12,000 a ton and it's been essentially around concerns about supply and there have been outages and there's a longer term issue which is let's leave aside the expectation that net zero by 2050 is possible. Nonetheless, the direction of travel in terms of mobility and in terms of power generation is towards lower dependence on hydrocarbons. That's going to happen and that is going to require huge amounts more in terms of copper and lithium and nickel and cobalt and graphite. And we simply are not seeing the investment in new mine capacity at the moment that would even get us. Let's assume we're not on a net zero trajectory, but we're even just at a halfway point from where we are today. And what would be required to get to net zero. We have nothing like the adequate investment going forward. And I think in 2026 I would keep my eye on copper. I think there's been all this talk about Chinese smelters cutting output in 2026 and that starts to become, I think, a material issue in terms of overall levels of copper supply. There's an almost habitual tendency to overstate supply capability and we keep overlooking the tendency of there to be problems with mines, whether it's in Latin America or Indonesia or wherever it may be.

A (56:15)

Well, and lots of political. Yeah, you've got beyond just sort of the geologic and sort of mining challenges you've now, we've thrown tariffs into the mix. We've discussed those. You have increasing political uncertainty globally inequality Driven by all sorts of different factors, you know, populism and all this stuff going on. I mean, yeah, those risks. And I think that you can say in general those risks are underpriced. And actually, I mean, I, I agree with you on the metal story. And this year is a year when trade, metals, trading desk and obviously there have been new entrants in the likes of, you know, VTOL and Mercurial and so forth, who building out teams precisely because of this story, you know, have had record years and already we're sort of hearing, you know, the clarion calls for copper as Dr. Copper's back. And you know, but still, I mean you could then temper that and say, well, we're still kind of at 10,000 its peak, but it's also 12, you know, inflation adjusted. It's not quite as impressive. It is certainly way off the 20, 30,000 that was predicted a couple of years ago. Right. I mean, so it has a very good narrative. I don't know.

B (57:22)

Yeah. And you know, the downside story to me is much more around demand and we're still facing headwinds for demand in the global economy writ large in 2026. So that is going to act as a constraint in the short term in terms of where prices are headed. But the medium and longer term narrative, particularly for the metals I mentioned and copper, it just seems that we've got, we need sort of 65% more copper than we're currently producing worldwide over the next decade or so for EVs and renewable generation capacity, building out grids, power grids.

A (58:11)

It's all very, well, grid replacement going on.

B (58:13)

Yeah, like absolutely. Now of course that is going to be retarded by the simple fact that certainly governments in the Atlantic Basin just don't have the money, you know, to push through with that grid replacement at the speed that would be needed to accommodate all the potential renewable generation capacity that they need to put in place. But nonetheless, there is a massive amount of investment, investment there in grids that is required and that is going to be hugely metals intensive.

A (58:45)

Yeah, we're seeing our sister firm, Hyperion Search, which is a renewables and clean tech firm. You know, it's all about battery energy storage systems and, and the grid. Right. It sort of moved away from wind and solar straight into, you know, actually. How do you, how do you manage this influx of renewables and, and get a smarter grid to support the, the EV fleets? Well, it's been fascinating, I guess. You know, while we've got you, David, is there, is there anything that surprised you about this year or anything that kind of in, you know, black swan is an overused term but. And it's hard to predict the unpredictable. But is there anything out there that's kind of like this is sort of off people's radar, but one maybe to watch?

B (59:24)

Well, I don't think it's necessarily off people's radar, but I mean I think one of, one of the surprise factors maybe that people have been been a little bit blindsided by is the volatility and very high levels of freight costs, which when you've got tariffs and you've got sanctions in place, shouldn't be a surprise. But the share of freight in delivered commodity prices has obviously gone way up. And everything that I think we see happening in 2026 says that, you know, freight is going to remain an elevated part of the overall equation and a very volatile part of the equation going forward. And certainly Argus, you know, we've been beefing up both our coverage of freight and you know, looking at, you know, incorporating that in sort of arbitrage analytics going forward. But I think just that the freight part of the, the equation in terms of costs and arbitrage flows, I think that's going to remain critical in 2026.

A (60:31)

Yeah, I mean our freight shipping portfolio, so the team that focus on recruiting mid to senior leaders in shipping and freight and we built freight trading teams stemming back 15 years now for the trading houses, but it's been a phenomenal few years for those group. And as you say, that's kind of where the volatility appears to have gone to. And one wonders, in part, you've got a whole influx of algo traders of various sources of money just, you know, going into commodity markets which itself has kind of a normalizing, stabilizing effect.

B (61:06)

Right.

A (61:06)

A mean reversion bit, whereas freight doesn't have any of that. You just don't have the same tools and mechanisms and money flows. And thus, you know, it's if there's only three ships and one doesn't turn up. So that volatility there has been crucial. And every single commodity trader out there or trading arm of a major or whatever refiner, they really need to lean into how they're managing their freight risk.

B (61:32)

I think absolutely. It's underdeveloped and it's going to be a massive area of growth going forward, I think.

A (61:38)

Yeah. Well, David, it's been a real pleasure having you on. We were lucky enough to have you on one of our panels on a live podcast event at one of your great events, argus's great events this year. So that was fun and really appreciate your insight and the time for this year and look forward to having you on next year and see all what develops and hopefully there aren't too many surprises.

B (61:59)

Well Paul, it's been a great pleasure and thanks for having me on and enjoy the holiday season.

A (62:06)

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 www.hcgroup.global.