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When the crisis started, the world lost we think now about 14 million barrels per day, which is about 13% of its of global oil supply. And if you calculate what the oil price should be getting to, it's it's much higher than anything we saw during the crisis. What is the sort of ballpark dollar figure that our viewers should expect the oil price to go to equilibrate supply and demand? Like what are we looking at now? Uh well I should say this is not a forecast but you know I love a rule of thumb and I've looked up the rule rules of thumb based on the uh the estimated uh
price increases you would need to destroy 13% of demand for oil and the number you numbers you get from the literature are a range of $167 to $460. Now I'm not predicting anything like that but it shows you that we are in a totally crazy world. the oil price sort of fluctuated with hopes and fears about an end to the war and President Trump's truth uh social posts and that sort of thing. So what traders were really thinking is we don't think this crisis is going to last a long time. There's going to be a deal. Point one. Point two, we think that deal is going to reopen the
Strait and reopen it in a meaningful, permanent way. And point three, that once that happens, things will get back to normal quite quickly and the oil price will come back down. But basically what's been going on over the last few days is that view has begun to collapse. There is no peace deal. So the first leg's going down and I think the whole lot is up for debate. Now traders, your friends Matthieu, the people you know well either have been assuming the war will end quickly, the strait will be open quickly and then we'll get supply back to normal. And we on our cover
this week uh I'm afraid decided that they were in La Land. But I think all of your conclusion is that oil prices are still not yet high enough to balance supply and demand as you laid out. So Mattiue, do you think these oil traders are now seriously nervous or will we go back to the more sanguin view we had just a few weeks ago? I still think they are uh to an extent in La Land because you know you can take two the yard sticks to judge that. One is to look at the past. Um look back at what happened after the Russian invasion of Ukraine. Um where the fear was that
we would lose about 3 million barrels a day of oil because western countries stopped buying it. Um we did not push that. Uh in the end it went to China and India. But that still pushed the price of oil to 100 near $130 a barrel. And today we're we're we're well short of that. even though the deficit is real and it's much larger like four to five times that. So that's one. The second one is to look at how this deficit is being um absorbed at the moment and it's mostly being absorbed by uh dwindling stocks. So perhaps 8 to 10 million barrels a day um at the moment if you
count government stocks and other types of stock commercial stocks um that's far too fast. It's it's it's you know it's a record space. We've never seen that which shows you that prices are not high enough to destroy demand. So when I speak to traders that actually trade the physical stuff, they move barrels all around the world, they agree with this analysis. They think the price has to rise uh much higher. Henry, one of the reasons prices haven't shot up as much as we had expected them to and one would expect given the scale of supply that's locked inside the
straight is that production elsewhere has gone up. Do you want to talk us through how much that has helped the situation and can it continue? uh well production elsewhere has gone up a bit but most of the additional production in the world that can be brought online is in the Middle East so it's also trapped uh you can get a bit from the US uh you can get a bit uh from loosen loosening sh sanctions on Russia you know these it's totally different scale to the lost production so uh it's it's it's really chalk and cheese here so that can't rescue the world from
the situation so you've had a bit from extra production and you've had a lot Matier from stocks both commercially held stocks and official reserves and uh stocks at sea effectively. What's what's happening? Can you talk us through all of those because part of the fact that we're all getting on planes and everything is still running is because of that supply that was kind of sitting out there and is being drawn down. Yeah. The biggest buffer really has been the oil that was already at sea when the war started and home is closed. And that was a result of a couple
of things. One is that Middle Eastern countries, the Gulf countries, they heard the, you know, the drums of war before it happened. They saw the American warships converge on the region. They saw the tensions rise and so they cranked up exports uh before the war started. All these tankers were already past the straits when uh when uh the first strikes happened. Uh so that's one, there was a lot of that already at sea. And then secondly uh sanctions before in the months before the war western sanctions were tightened on Russia and Iran which pushed uh Chinese buyers
Indian buyers to um to sh you know the tankers that carry these barrels usually. So you had this excess of Russian Iranian crude and products at sea and add all this together and it was quite a big volume. What's happened to that? Has that been drawn down completely? It's been drawn down very significantly really fast. I mean if you look at specific product like jet fuel we are far below historical averages. Um it's the same for diesel and we're pretty close to you know the minimum level you need to just sustain trade at sea. You know you need a certain number of
bowels for the transit to be possible. Um and then for crude you've got a bit more but uh also you need to make longer voyages these days to link the US to China for example because the Gulf is no longer a source. Uh so even that is not that reassuring. So what happens then? You're reaching stock levels that are well below well or minimal and you have demand that is much higher than the sort of sustainable amount of supply. So presumably prices have to absolutely shoot up to reduce the demand as much as is necessary. Yes, exactly. I mean there's basically two levels
left. One is demand destriction. The second one is stocks, commercial stocks dwindling. Um and what you're seeing now is mostly commercial stock taking the brunt of it with some level of demand destruction in Asia. Um and that means that commercial stocks will fall quite fast.
