[00:00] I want to talk about something that, you know, it's sort of hidden in the background in a way. Kepler had pointed this out earlier in the year when it was looking at oil consumption.
[00:12] So this was a very interesting graph I remember seeing. And they pointed out that China, China's consumption had fallen. And there is an argument that is going around that's being made that in a way,
[00:25] the reason that prices stayed below $100 a barrel for as long as they did into this conflict was because of China's strategic petroleum reserves. What intelligence do we actually
[00:37] have on that? Because it's an opaque situation and we don't really know how much energy supply China really has access to. So I was keen to ask you about that because it is something that many are saying has affected prices. You're right, Manisha, and I think it has had an
[00:54] outsized effect on oil price formation during at least the second half of the seven-month crisis. Before the war, China was the largest importer at 11 million barrels per day, so substantially
[01:07] more than 10% of the global market. And a lot of that was to run China's refineries, and those refinery runs were throttled back as one of the several measures that Beijing took in reaction to the conflict. And so Chinese crude oil buying plunged in summertime,
[01:24] And it got as low as probably 6 million barrels a day and change again from 11 where they started. So close to not twice half of their import buying appetite was suppressed.
[01:37] And that no doubt helped put a lid on crude price escalation. Now what we see, though, in recent weeks is Chinese state-owned enterprises and some of the independent we're finding in China
[01:49] returning to the market with more of a vociferous appetite for crudes from all over the world not just the Middle East but Latin America and West Africa and other regions as well So this is one of the reasons why crude is catching a bid
[02:03] And we see that reflected not only in the physical markets, but also in Brent crude futures. Very quickly, because it's going to be all we have time for, Clay, but obviously we don't see any let up in this situation.
[02:17] With this overall what seems to be weaponization of the energy markets, what can we expect to see if this deadlock continues in terms of the pressure where prices are concerned, but, you know, the pressure in terms of also the weaponization of this commodity?
[02:38] Well, I expect that we will see additional attempts for policy interventions in the market. It's not necessarily only export controls, but also thinking about the potential, the potential for another drawdown of strategic reserves above and beyond what was authorized by the International Energy Agency and by the United States government back in springtime.
[03:04] Clay, oil over $100 a barrel, does it make a Fed rate hike this week a slam dunk? I'm not sure about a slam dunk, but it definitely goes against the preferred direction of travel in Washington,
[03:19] which would be to have an easier monetary policy and to get rates lower in order to stimulate constructive economic activity. So it's a huge headwind to a dovish stance by the Fed.
[03:32] And we'll have to see the extent to which diesel works its way through and transmits through the macro economy in the months ahead. I think that that's something that's probably going to be determined after the U.S. presidential, the U.S. midterm election that's taking place in November.
[03:46] We probably won't have good data before then.