MacroVoices #450 Dr. Anas Alhajji: Oil, Middle-East Politics & China
01:01:57 Share

This is Macro Voices, the free weekly financial podcast targeting professional finance, high net worth individuals, family offices, and other sophisticated investors. Macro Voices is all about the brightest minds in the world of finance and macroeconomics telling it like it is, bullish or bearish, no holds barred.

Now, here are your hosts, Eric Townsend and Patrick Ceresna. Macro Voices Episode 450 was produced on October 17th, 2024. I'm Eric Townsend. Energy markets expert Dr. Anas Al-Haji returns as this week's feature interview guest. We'll discuss all things crude oil, starting, quite obviously, with the geopolitical risks.

And be sure to stick around for this week's postgame segment after the feature interview when Patrick will dive into how commodity investors may be leaving money on the table in the upcoming bull market. Patrick will also have an update on how his gold trade is shaping up this year and details on a special webinar that you won't want to miss. And I'm Patrick Srezna with the Macro Scoreboard week over week as of the close of Wednesday, October 16th, 2024. The December S&P 500 futures up 3%.

The US dollar index up 63 basis points, trading to 1.352.

deeply retracing the summer decline. The November WTI crude oil contract down 389 basis points to 7039. Geopolitical headlines continue to drive short-term volatility. Eric and I will look at that chart in the postgame. The November RBOB gasoline down 243 basis points, trading at 201. The December gold contract up 248 basis points, trading at 2691. The

quickly was bought on dip and now again pressing toward all-time new highs. Copper down 68 basis points to $4.37. Uranium down 30 basis points, trading at $83.25 and continues to show signs of life. The U.S. 10-year Treasury yield down 3 basis points, trading at $4.04. And the key news to watch next week, we have the Bank of Canada Monetary Policy Statement, the European and U.S. PMIs, and the first big wave of earnings reports.

This week's feature interview guest is energy markets expert Dr. Anas Alhaji. Eric and Anas discuss the Middle Eastern tensions, the long-term oil market outlook, and the impact China and Russia are having on the oil markets. Eric's interview with Anas Alhaji is coming up as Macro Voices continues right here at MacroVoices.com. ♪

And now with this week's special guest, here's your host, Eric Townsend. Joining me now is Dr. Anas Alhaji, former chief economist for NGP Energy Management and founder of Energy Outlook Advisors. Anas, it's great to get you back on the show. I want to start by crediting you. When we first spoke just after October 7th last year, just after the Gaza attacks, I

I was convinced that we were about to see a huge blowout to the upside in oil prices. And you very correctly and presciently corrected me and said, look, it's not 1973. It's a different situation in that situation, which is what everybody was drawing attention

analogs to at the time. You had all of the other Arab states wanting to get behind Iran. This is a situation which is opposite. You nailed that call. I didn't listen to your advice, lost money on the trade by not heeding the master. So I won't repeat that mistake. It's a year later. Give us the update. How should we be thinking about the Middle East, where it could be headed from here and what it will mean for energy markets?

We had a situation recent weeks, basically, where we had a rumor that Israel was going to retaliate for the Iranian attack by attacking its oil facilities and prices started going up.

And then at the end of last week, someone asked President Biden about the situation and whether Israel will attack the oil facilities of Iran. And President Biden basically made the statement, kind of a strange statement. He said, we are discussing it.

The market and many analysts understood it as it's a green light from the United States and probably the United States will even participate in an attack on Iran. Our view from that, when I say our, I'm talking about me and my colleagues at Energy Outlook Advisors. We thought that the market misunderstood what President Biden said. He meant we are discussing it. It means that we are trying to tell the Israelis not to do it.

So we've seen prices going up to $80. Then we have the anniversary of the October 7th on Monday. Everyone was expecting something to happen, but prices went up. And then they went down by 5% on Tuesday, went down a little yesterday, and now they are going up by about 3%. What happened is why we have this rise on Monday and this rise again, etc., that the

Someone asked Kamala Harris about Netanyahu, whether he is an ally or not. And Harris basically tried to avoid the question. That gives the impression to the market that Netanyahu is a leech and the United States has little influence over him and therefore he can do whatever he wants. And therefore, the Iranian oil facilities are still under threat no matter what. The other issue we have basically is the hurricane.

The hurricane, just the news of the hurricane basically kind of make traders on the edge. We have some companies that withdrew workers from certain platforms in the Gulf of Mexico. And then we have, of course, no gasoline in many counties in Florida right now. We have major chaos, etc. So all of these combined led to the increase in oil prices today. So the whole idea here is

about Iran. This is a completely different game from a war between Israel and Hamas or Israel and Hezbollah in Lebanon. Attacking the facilities definitely will affect supplies. The issue from our point of view is, will they do it? And if they do it, what will they do? And here is the problem. Any attacks from Israel on Iran is going to be very limited. And the reason why, because Israel has no borders with Iran.

which means that they need to get permission from other Arab states to use their airspace. And not a single Arab country will allow that. That will force Israel to use F-35. And to use F-35, based on what I understood from military experts, that you cannot see it via radar, so they can sneak in. But whatever ammunition you carry is small, and you cannot have it both ways.

You can use F-15, but F-15 is visible to the radars. The other issue is they need refueling, which means that probably they need the help of the United States anyway. So any attack basically is going to be limited. Now, what they are going to attack, and I'm talking here about energy infrastructure. If you are, let's say, in a ship in the Hormuz Strait looking north toward Basra, toward Iraq,

All those fields on the right in Iran, on shore, all of them, from the beginning of Hermos Strait all the way up, even after the end of the Gulf, you go up on shore, all of them basically stretch about 1,500 kilometers.

And there are hundreds of fields. You start with the gas fields in the south and the oil fields in the north. So there is no way any military officer will waste any ammunition after traveling all this distance on some small stuff like a rig or a production platform that produces a very small amount of oil.

So the idea that they are going to hit their oil production facilities is just complete nonsense. Now, there is a problem with Iran. The problem is most of their exports come out of a small island called Kharj Island. So why hit production facilities? All you can do basically is hit Kharj Island and you hit most of the Iranian exports. Probably 85 to 90 percent of their exports come out of that island.

So you hit the island. Even hitting the island, you are not going to hit all the ports in this case because it has many areas there where tankers can load the oil. But assuming that there will be a massive attack and destroying the whole island, we lose about 1.6 million barrels a day. And that's a major blow for Iranian revenues.

But will that lead to a change of regime, et cetera? No. And the reason why, because we've seen this before. Iranians basically lost all their revenues, lost all their exports, et cetera, and the regime is still there. And this happened many times, even during the Iraq-Iran war happened several times.

So this is not going to change the regime. It's going to inflict damage and most likely is going to be on the Iranian people. For some reason in the West, they think, well, if we force the Iranian people to revolt, then they can change the regime. Well, they tried several times, as you know. They've been trying for a very long time. And we had major demonstrations, et cetera, and they couldn't.

So the idea that if they lose revenues, that we will end up with a situation where we have a changing regime just does not make sense. So we are left with few targets. If we talk about oil, which is mostly probably a couple of refineries, probably a petrochemical plant, something like this, the impact of it on the international market is very limited.

So we are left only with Kharj Island, and that's it. So let's assume that we lose all this 1.6 million barrels a day. Iran has a new pipeline that stretches from the north to the south, and it passes the Hermes Strait. The capacity of that pipeline is about a million barrels a day. It will take a few weeks for the oil basically to go through it to Jask port.

So there is a solution for Iran within a few weeks to solve the problem of the destruction of Kharj Island. Probably not all of it, but most of it. Iran has other ports too, and we've seen them more active in recent days than before. The other issue here is most of those exports go to China. And

China, the moment they know that they are not going to get the Iranian oil, they will start releasing oil from their inventories. And it's very easy for China to release, let's say, almost 900, 1 million barrels a day from various sites to compensate. So we will see immediately. And this is an immediate thing. Its effect will be seen in the market in two or three days. So it can compensate.

For the other OPEC Plus members, it is very important for everyone who is listening to this to know the following, that no official in the Gulf region, whether Saudi Arabia, Kuwait, UAE, Bahrain, Oman, Qatar, want any oil facilities in Iran to be attacked. None. And on October 10th, last week, they announced that they don't want the Iranian oil facilities to be hit.

So they have no interest at all. And there are several reasons for that. One of them is they don't want the cronies of the Iranian regime to be hitting them back. We've already seen what happened to Saudi Aramco in September 2019 when they were hit really hard and we lost 5.5 million barrels a day. No one wants that.

It is clear that the Biden administration does not want that. Just about more than a week ago, President Biden stated that on TV, that if he were in the Israeli shoes, he will not hurt the Iranian oil facilities. He and nor any Democrats basically wants higher oil prices. In fact, I joined a space with a lot of people, thousands of people, where there were Israelis

in that space, and this discussion is coming from the Israelis, Israeli listeners, basically, who participated in this. And they were saying that if Netanyahu hits Kharj Island and oil prices increase substantially, it literally means that he intervened in U.S. elections on behalf of Trump. So people are aware of the impact of higher oil prices on politics and U.S. elections.

So this is really what's going on with higher oil prices and the geopolitics of it. It's all literally about Iran right now. But on the other side, we have a serious problem. Why oil prices declined from 90 to 70 or even below 70? I'm talking about Brent here. We had cuts from OPEC+. We've seen decline in exports of Norway, the United States, Brazil. We also lost the Libyan oil.

We lost about 550,000 barrels a day of Libyan oil, yet prices declined. And the reason why, because the sum of all those decreases or reduction in oil supplies is still less than the decline in China's oil demand. We had massive decline in China's oil demand.

And that's really why prices were declining. And still, Chinese oil demand and Chinese oil consumption in particular, because we do distinguish between consumption and demand, and I'll explain this in a minute, it's still very low. And people were saying, look at the positioning of traders. It's the lowest in history since 1981 or something like this. Well, it is the first time we have this major decline in Chinese oil demand besides what happened during COVID.

So it's very clear that everything that happened was logical and based on fundamentals. They said that the decline in Chinese oil demand was caused by the penetration of electric vehicles and LNG trucks. Well, we studied that and we published a whole report on this. And one of the results is the following.

And I would like to elaborate more on this so everyone can understand how the impact of EVs basically is exaggerated. In the world this year, we are going to have about 50 million electric vehicles on the road. Notice that the media focuses only on the percentage of sales. They never tell you the number of cars on the roads. And really, that's what we...

are after because the impact comes from the number of cars on the road, not from percentage of sales. But it is very clear that the media wants you to feel that you are the only one who is not driving electric vehicle. But they tell you, look, the percentage of sales went up from 40% to 65%. And in case of Norway, it's almost 100% right now. So are you driving an EV yet? Well,

Percentage of sales is one thing. The number of cars on the road is something else. So in the world today we have about, or this year we will have about 50 million electric vehicles. What is the direct replacement of oil demand? Notice that I use the word replacement instead of saying that demand declined by that much.

So the direct replacement is only 1.23 million barrels a day. And that's it. And this happened over a period of 15 years. It did not happen yesterday. So if you've been reading what the media is publishing, you would be surprised by this number because you would think the impact is way, way larger. So it's only 1.23. And this is the direct gross impact. Why I say gross? Because it's not the net.

Because if you look at China today, what's been happening in the last three years in China, the demand for NAFTA and LPG was going through the roof. Why the demand for NAFTA and LPG was going through the roof? Because all of that NAFTA and LPG was going to the making of electric vehicles that China is producing. And that amount is not included in the 1.23. So we have to subtract it. And there are, of course, a lot of details here. I'm going to give you one quickly.

Because electric vehicles are heavy, they use more tires than usual. And we calculated that between 2016 and 2022, the replacement tires, just the replacement, this is not the original, just the replacement tires for EVs increased oil demand by about 60 million barrels.

And that 60 million should be subtracted from that 1.23 million barrels a day. Now, the 60 million is barrels not a day. This is the whole period. So we can divide it by the number of days to get the number of barrels per day. But the idea here is this 1.23 is really not reflective of what the impact is. The real impact is way, way lower than that. We did another study on Norway.

And we found out that, and I'm going to, those numbers are not real numbers. This is just for illustration. Let's say if you, if someone in Norway buys electric vehicle instead of gasoline vehicle, and that gasoline vehicle uses 10 barrels of gasoline, or let's say oil, if you want to go with that, a year. That means the direct replacement is 10 barrels. We found out

that the direct replacement is only six barrels, not 10, which is less, way less than what various reports are talking about. Why? Well, we think one of the reasons, because electric vehicles are second cars, and therefore the number of mileage a family drives a year is divided by

between the two cars and therefore they drive the electric vehicle less and therefore the replacement is less. But the whole idea here is that this, when we talk about China, so we have 50 million vehicles on the road in 2024, half of them are in China, 25 million. The replacement, the direct replacement is only 600,000. But again, this is over several years.

If you look at this year, when demand declined substantially, between the beginning of the year and the end of July, they sold about 6 million electric vehicles. At the same time, we are seeing a shift to LNG trucks, so they don't want that diesel. If you look at the number of trucks, LNG trucks sold and EVs sold,

you'll see that the replacement, the direct replacement is less than 250,000 barrels a day. But China's demand declined by more than 1.2 million barrels a day. So how do you explain that? That means most of the decline in Chinese oil demand is related to economic growth, and some of it is related to electric vehicles and LNG trucks. And when we talk about LNG trucks, we have an issue here.

And I think some people will hear this idea for the first time. And this is a very important idea. I'm going to link two ideas together here so people can understand the issue. If we have a shipping, a Greek shipping company that has 100 oil tankers, and we have a decline in demand for those tankers from 100 to 80.

And it just happened that 10 of them are sanctioned by the United States. So you are the manager of this fleet. You have 100 and the demand only for 80. So you have to idle 20. Which 20 you idle? Logically speaking, you take those sanctioned tankers among those 20.

So the 10 sanctioned tankers basically will be included in this 20. The other 10 will be the least efficient, probably the oldest and least efficient. So what happens in this case, someone at Bloomberg basically will learn that those tankers are idle. And then we will have this long report on the success of Biden sanctions on Russia.

And how the sanctions are working because those tankers are idle and they get you the pictures and they get you the locations of them, etc. And they keep reporting on this every couple of days that, look, the sanctions are working.

So you reduce your fleet by 20 tankers and you pick up those tankers that are on the sanctions list and to avoid the problems, you don't want that headache. But once demand increases, you bring them back. And that's what we've seen, that they brought them back, which means that it wasn't about the sanctions. It just was business as usual. They just they don't want the headache for nothing.

Now, you take this idea of the tankers and apply it to China and LNG trucks. It's exactly the same case. You have very slow economic growth. The trucking industry is suffering in China. So the demand for trucking declined substantially.

So now you don't need that many trucks. So which trucks you idle? You idle the least efficient. So you are going to keep the new LNG trucks that are efficient and you are going to literally park those trucks that are

are inefficient and they use diesel. That's why the diesel demand was going down and LNG demand basically was going up for those trucks. But once you end up with economic growth above 5%, they are going to bring all those trucks back and demand for diesel will go up.

So the bottom line here is the idea that electric vehicles and LNG trucks caused all this decline in demand for oil in China is nonsense. Only a portion of it. And for ease of use, just remember this, 25%, 75%, which means that 25% decline in oil demand is caused by electric vehicles and LNG trucks. 75% is caused by lower economic growth.

Honest, let's go back to the Iran scenario in what you described as maybe the worst case. It's about a one point six million barrel per day. Just for the sake of argument, suppose it's the really worst case and it's as much as two million barrels a day. Maybe they hit the pipeline as well.

It seems to me in that scenario, what's really happening is you're handing a huge amount of power over to OPEC Plus because in an environment where OPEC Plus has more than 2 million barrels a day of spare capacity, as I believe they do now, if they want to, they can make up for it. But if they don't want to, they don't have to. So is that the right way to think about it? And if so, what should we expect in terms of how OPEC Plus would use that power if it was given to them?

Well, the irony is you are giving more power to Putin. Okay, explain. You are trying to reduce his revenue. So exactly the ships issue that I talked about, or I was talking about, is exactly the case. So you are just giving him more power. Okay, and what would you expect OPEC Plus to do in that scenario? Do you think OPEC Plus would try to keep oil prices down to avoid a big escalation, or do you think they would seize the revenue opportunity?

Well, there are a couple of issues here. Again, politics of the region plays a very important part here. So they don't want to annoy Iran. They don't want to appear that they are winning or making money at the expense of Iran. So I think they will go for a wait and see period. But at the same time, they already have a plan that they agreed on that they will unwind the production cuts by the 1st of December.

So what they can say is, look, we are going to unwind as we planned long ago before even Iran was in the picture. And they can do that without annoying Iran. And that amount they will unwind over a year in total at the end of the year is larger than the loss of Iranian oil. But to go from day one and start working over four to six weeks to increase production to compensate, that will backfire.

Let's bring Russia back into this. As we see a re-escalation, which I think is coming in the Russia-Ukraine conflict, how does that complicate the situation? And what happens, as you said, they're handing power to Putin. How do you expect him to respond to it?

A couple of things here. The first one is they will try to increase production as they planned, just like within OPEC+. That's number one. The other one is now China has to go back and import more from Putin, which Putin wants because Putin felt probably in recent months that China is calling all the cards because he needed to sell his oil and gas. And now China will be in the corner.

given the fact that if you look at what China has been doing for the last two years, the whole behavior, including we have news today regarding this too, they decided to go for discovery or discovering oil and gas anywhere in China. And now they are going back to coal again. This is kind of a move showing that they really wanted to have more domestic sources

In preparation for war, we don't know whether this war will happen or not. We don't know when it's going to happen, if it's going to happen. But it is very clear that they are preparing themselves for a war through building more domestic sources than before, and they are doing it quickly.

And that's what attracted our attention, that they went on a spree of spending. They had major discoveries and they are developing those, but we don't think that they are going to utilize them. It seems that they will develop those discoveries and use them whenever they want to. And that's the trend.

Honest, we've talked about worst cases, as I'm known for talking about. Let's compensate for that by also talking about best cases. Suppose that we're able to get a resolution to this conflict with Iran and Israel and so forth. Frankly, I don't expect that, but I want to talk about all the possible cases. What would be next for the Middle East then?

When it comes to the oil market, remember that Israel does not have any oil. Gaza does not have any oil. Lebanon does not have any oil. The only reason why the market was affected because Iran got involved and Iran produces 3.3 million barrels a day. So that's the reason why prices were rising. But before that, we had an impact coming out of the Houthis and the Red Sea when they started hitting ships and oil tankers.

And that raised oil prices and raised the cost of shipping and forced tankers and LNG carriers to go around Africa instead. And the question we get all the time is, OK, if the war in Gaza ends, will the Houthis stop? And the answer is no.

And we have done a couple of spaces, one of them with a Middle East expert, Professor Bernard Heichel out of Princeton, who is a specialist in these areas. And he emphasized the point. He said, look, the Houthis basically found out that they have a very significant card in their hand.

And they are not going to relinquish this card just because the war in Gaza ends. That's the only way they can negotiate, the only way the West can recognize them, etc. So the attacks basically on the shipping lanes in the Red Sea are going to continue even if the Gaza war ends. And therefore, the impact on the oil market is going to remain this way.

As for other things, if we are looking at a more peaceful Middle East, it is very clear that the Gulf nations are going to go for diversification. They are working really hard. I mean, whether you are talking about Saudi Arabia, Oman, or the UAE in particular, they are trying to diversify their economies, which means that they will be less reliant on oil. Oh, by the way, one of the bearish factors right now at the end of the summer,

And I failed to mention this in the beginning. So we don't have only China that's where the demand is lower. At the end of the summer, the demand for cooling in the oil producing countries in the Middle East and North Africa declines, which means that the demand for power declines and the demand for oil to burn in the power plants declines. Now, those countries have this extra oil to export.

And that amount could be large if they don't go for maintenance between the Middle East and North Africa. This might add about 1.2 to 1.4 million barrels a day.

without violating OPEC plus quota because the production is staying the same. This is just a diversion from the domestic production to export. But generally speaking, after the war ends, we will see this move toward diversification increasing. And in case of no Hezbollah and no Hamas, etc., and more peaceful Middle East,

This might sound like bearish for oil, but it's not. And the reason why, just think about it, Iraq growing at 20, 25% per year, because Iraq is still devastated until now with no infrastructure and no economy, nothing. So imagine going for all those massive projects and everything else. So whatever additions they are going to bring online,

is going to be consumed within the country itself and their demand for electricity, for gas, for oil is going to increase and the same applies to Egypt and Sudan and others. So any increases in oil production or oil supplies in the region is going to be consumed within the region because of the economic growth they are going to experience. Let's talk a little bit longer term now because I have a really big question mark in my mind.

I'm extremely profoundly bullish crude oil prices in the late 2020s. And the reason for that you and I have discussed at length in prior interviews, so I won't rehash it here. Listeners just put on us his name into the search box at macro voices dot com. In our past interviews, we've talked quite a bit about supply imbalances that would

caused both Dr. Anas and I to feel extremely bullish in the late 2020s about a supply-demand imbalance that just won't be able to deliver enough crude oil to the world. But as much as I have strong conviction about that view, Anas, I can't decide what happens between now and then.

What's your outlook for that bridge period between let's say that that hopefully there is at least a slowing down of the geopolitical tensions? We don't take ourselves all the way to nuclear self-annihilation and we're still here in a few years. How do you see it going for the oil market until we get to that late 2020 scenario where you and I both agree prices have to go up?

We have new development to report, Eric. The first one is ExxonMobil released its, supposedly its outlook to 2050. It's really not an outlook. It is more than a PR document replying to the International Energy Agency and to the head of the UN by saying, okay,

you guys want us to stop today investing in oil and gas. So here is what's going to happen if we stop investing today. And if you look at that scenario and the Exxon outlook, it's extremely scary, especially in the midterm and the medium term, because all of a sudden you have a complete collapse of the world economy with unemployment going through the roof, et cetera, et cetera, just if we stop investing.

But that exercise that Exxon did told us exactly what you and I talked about even a couple of years ago, that we do need trillions of dollars of investment, whatever the future demand for oil is. Even if we have a decline in demand in the future, we still need trillions of dollars to invest to meet that demand simply because we have decline rates and we have to compensate for those decline rates.

So that's on one side. But Exxon basically stated something else that's very important. They said, look, historically, decline rates basically were between 4% and 5% per year. And that's the average for the world. The IEA came in later and said because of shale, because the decline rates in shale is higher, the average decline rate for the world is 8%.

Exxon is coming in right now and saying, look, because of lack of investment, the decline rate is 15%. So you can see where the crisis is. We have a serious problem. And if banks stop financing oil and gas and various private equities stop financing it and all those organizations like Rockefeller and others stop financing it, how are we going to meet that demand?

Then OPEC came up with an outlook. They revised their outlook, and we're very lucky to see this is the third revision by OPEC. And it's very close to our outlook that we produced two years ago, where they said, look, there is no decline in all demand, not in the medium term, not even in the long term. But here are the problems. They built on Exxon outlook, and they said, we need like $17 trillion to

in the base case, to meet oil demand by 2050, $17 trillion. And we don't have that amount of it. That's like $650 billion every year. We've been at $400 to $500 in recent years. So we are short already in terms of investment. The other issue is none of them basically are counting for the fact that the demand for electric vehicles is declining.

which means that more demand for gasoline and diesel. They are not counting for the fact that probably this segment of electric vehicles is already saturated, and therefore all those rosy pictures about the whole world adopting electric vehicles is not going to materialize. Now we see a shift in some countries to hybrid, and in India, for example, they are back to CNG, compressed natural gas, which is kind of like really...

Everything is going in the wrong direction for those who are claiming that electric vehicles are going to be widely adopted. And if you look at various forecasts, I mean, we are in 2024, but you look at various forecasts, they are talking about 240 million vehicles by 2030. That's electric vehicles, 240 million.

And now we are at the end of 2024 and we have only 50. And that's after we used all the easy resources, after we used all the cheap resources, everything that was cheap, cheap, cheap, cheap, cheap. So what is next? So you are absolutely correct that there will be a time when we have lack of investment on one side and we are going to be hit by increasing demand because of the failure of green policies. And there will be this mismatch.

And that mismatch where the energy crisis is going to hit. And then everyone start waking up, but it's too late by that time. So even medium term, even medium term, we have serious problems because of that. Honest, now I'm going to throw another monkey wrench into this, which is

I think there's a really big question mark of what would happen if we lost a major refinery. And the reason I say I think that's a big deal is, look, for all the reasons we've been discussing, there's not only a government disincentive against any new investment, but if you talk about justifying a refinery build, that is one gigantic piece of capex that has at least a 50-year payback.

If the entire world has agreed, almost all Western governments are allied together to put this industry out of business sooner than the payback period on a new refinery, then how in the world could you possibly expect to finance building a new refinery? It can't happen. So it seems to me like if we lose one, we're screwed.

Luckily, we have some same people in Asia and the Middle East who were building refineries and above their capacity, realizing that in Europe and the United States, those refineries are going to close so they can take their market share. So the idea, and this is kind of very strange idea. I mean, once you think about it, you see where our politicians are taking us.

They don't want to import electric vehicles from China. They don't want to import everything needed for the batteries. They don't want to import solar panels. They don't want to import the parts for wind turbines. And they are imposing all those kinds of tariffs, etc. While they are busy with all these things, in the future, when all demand continues to increase and we need the products, we are back to China because they have the largest refining capacity.

So you can see where those politicians are missing the point that, okay, you are obsessed. Okay, so let me see if I've got this straight, honest. You're saying you start with China doing a better job than we've done of making electric vehicles cheap and available and affordable. Tesla makes an amazing vehicle, but they're not cheap. If you look at the Chinese electric vehicles, they're accessible and affordable to everyday Americans.

Well, we can't have that. So we're going to put these outrageous tariffs on them that are going to prevent the adoption of those Chinese electric vehicles because we could never reward China for doing something like, I don't know, solving energy transition and climate change for the whole planet. Don't credit them for doing something good in that regard. Instead, we'll punish them in a way that denies access to those vehicles to Americans to the point where we still have

gasoline powered vehicles. But if we lose a refinery, we don't have the gasoline. So we have to become dependent not only for manufacturing, but also refining to take crude oil that you produce in the United States, put it on a ship and send it to China to be refined. They will drive it from the port to the refinery using an electric refinery.

truck because that's not tariffed and outlawed there. They will eventually send the finished gasoline back to the United States where we can burn it. Thanks to our politicians making this all economically feasible.

efficient for everyone? Am I getting the general picture right here? You are absolutely right, and we are already seeing it with the Russian sanctions, right? The same procedure, exactly the same. That Russia sends its crude to China and India instead of Europe, where Europe is just in Russia's backyard, so they pay for the extra shipping, and then China and Russia refine that oil, and they send it back to Europe as refined products.

It's the same story. Well, Anas, as always, I can't thank you enough for a terrific interview. I do want, before we close, though, just to give our listeners a little bit of perspective on how they can follow your work and what you've been up to. I know you just completed a speaking tour through Canada, United States, and doing a bunch of talks. Are you available to

to do more of those for companies that might be looking for a keynote speaker? And what else are you up to with Energy Outlook advisors and your sub stack and so forth? I just finished a speech tour on

And looking for the Christmas time when companies basically have the investors meeting and the board meetings, etc. So if they are interested or looking for a speaker to talk about the situation in the oil market, in the LNG market, the impact on natural gas, I am available.

And Anas, for people who might be interested in following your work on Substack, I think there's a free Substack and then you can subscribe to get the longer version. What's the perspective on that? And also, what services do you offer from Energy Outlook Advisors? So we do have the daily energy report. I think this is like the very exciting part where we comment on the news and we always brag about providing charts that do not exist anywhere else.

It's relatively cheap. Anyone can afford it. We also have the Twitter subscription, by the way, which is super cheap.

And we have the longer version that mostly for institutional investors and companies. That's where the newsletter is. Today, we are going to release a report on the, I mean, throughout this talk today, through the program, we talked about the possibility of Israel hitting the Iranian facilities, oil facilities. But we did not talk about the Iranians responding by hitting the Israeli gas facilities and gas fields.

So the report we are going to release today is about this. What are the impact of Iran hitting the Israeli gas fields and what their impact on Israel and neighboring countries? Patrick Ceresna and I will be back as Macro Voices continues right here at MacroVoices.com. Now, back to your hosts, Eric Townsend and Patrick Ceresna.

Eric, great interview with Anas. Now let's get to that chart deck. Listeners, you're going to find the download link for the postgame chart deck in your Research Roundup email. If you don't have a Research Roundup email, it means you have not yet registered at Macrovoices.com. Just go to our homepage, Macrovoices.com, and click on the red button over Anas' picture saying, looking for the downloads.

Now we will get to the topic of leveraging your gains on the next commodity bull market, but let's first do a quick review of the oil markets. Eric, what's on your mind?

EIA inventory was delayed by the holiday this week, so I don't have any inventory stats to share with you. And as I'm recording before the open on Thursday, we're back below $70 on WTI again. Boy, what a roller coaster. I'm flat crude oil and continue to feel that the market isn't really offering any great directional opportunities. Go long here, too much interim risk of a bigger drawdown. We don't know how much lower this market can go. We don't know what OPEC Plus is going to do next in terms of

increasing production, how much, by when, etc. Go short this market in this geopolitical environment? Are you crazy? No way. Options, vol's too expensive. So I don't see the directional trade. Term structure is not behaving as I normally expect it to. So I don't see a trade here.

Yeah, Eric, geopolitical headlines continue to stir massive volatility in the markets. We had a very fast 50% retrace of the prior sell-off from the summer, but quickly we find ourselves approaching the bottom end of the range again on geopolitical headlines.

The big question for me, will we see a similar situation like we saw in December and January, where even though the oil markets go to the bottom end of their ranges, they stop making lower lows as we approach the 70 level? I think it continues to be a very interesting pivot. If we just continue to see even an entire month just be consolidation in the low 70s as we get into the elections, it could become a basing formation that establishes the lows. But

it probably will be a meat grinder for the next little bit. Okay, Patrick, I know you've been looking closely at commodities, and I very much hold the view that we are in a new commodity super cycle. Ola Hansen on the podcast has echoed that same view. I know that you've had some insights on how investors might actually be leaving money on the table in this commodity bull market. Can you walk us through what's on your mind, what you're seeing, and what your strategy is all about?

Eric, commodity markets are truly the epitome of boom-bust cyclicality. We've all seen examples of commodity stocks that plummet, losing over 80% of their value, only to soar by hundreds if not thousands of percent in the subsequent booms. Any long-term veteran of commodity investing can attest to this. There's a very well-known adage that bear markets are the authors of bull markets and bull markets are the authors of bear markets.

I believe we're nearing the end of the recent commodity bear market. And if you look at the chart on page three of the Bloomberg Commodity Index, you'll see that the bull market from 2020 to 2021 has been followed by the 2022 to present bear market consolidation. While some commodities like gold, uranium, coffee, and orange juice have shown strength, the majority have struggled over the past few years.

For listeners who subscribe to the secular bull market thesis in commodities, these kinds of bear markets offer tremendous long-term opportunities.

At Big Picture, we're all about finding convexity to capitalize on these deeply volatile boom-bust cycles. And we believe the next big opportunity is just around the corner. And that's why we're hosting a special webinar to help listeners understand how to maximize their gains in the next commodity bull market. Okay, Patrick, back at the start of this year, you did a very similar webinar, which was titled Unlocking Profits in the Coming Gold Bull Market.

Needless to say, you nailed the call on the gold bull market. There's a lot of us that are very happy about that. But you had some very specific trades on that were a little more complex than just going long gold. How's that faring this year?

Well, Eric, we actually hosted a very similar webinar at the start of the year because we believe the next leg of the gold bull market was beginning. During that session, we highlighted several trades in gold and gold miners, which have gone on to deliver extraordinary gains. In the upcoming webinar, we'll be showcasing those live account trades, many of which are still in place today. While the returns have been impressive, what we believe stands out the most is the asymmetry of the execution.

It's not just about the gains. The management of the risk was what has allowed us to position ourselves with such conviction. This is a concept that needs more than just a quick conversation to fully explain, which is why we're holding this special webinar to be able to visually share these insights. We've been using this system successfully for a half a decade now, and we feel it presents an extraordinary opportunity, particularly given where many commodity stocks are trading today.

Patrick, is this special webinar free and where do people register? The special webinar will be on Thursday, October 24th at 4 p.m. Eastern Standard Time. It's completely free to attend and you can register right on the homepage of bigpicturetrading.com. Okay, Eric, what are your thoughts here on equities?

Patrick, no surprise in my mind that this melt up has continued. That's what I was expecting. I think it's political and election related. It'll be interesting to see what happens after the election. And don't forget, a lot can happen in these last few weeks, both before the election and even after the election before Inauguration Day.

Another attempt on President Trump's life, quite frankly, is more likely than not, in my not so humble opinion. Anything is possible here, and we don't know how people are going to react. The last time Donald Trump was elected president, there was quite a bit of civil unrest and people were upset and protesting and so forth.

If he is reelected, it's likely that there will be more of that. A lot of finger pointing, blaming, civil unrest, violence. How is that going to affect markets? It's going to be very interesting. If Vice President Harris is elected, that's going to create its own set of issues and concerns. And if we get a hung situation, a contested election, which frankly I think is pretty likely this particular year, that just brings more uncertainty and uncertainty

more excitement and fireworks to the market. So let's see what happens. Yeah, Eric, I think that the big driver of equities from this point forward is all going to be about how the earnings come in in the next two weeks. With the market up around the 5,900 level, of course, a stab to the round number of 6,000 is always something markets naturally gravitate to.

But the bigger question is, is that will the earnings guidance suggest that markets can justify these valuations or would it spur a catalyst for potentially creating a mean reverting correction? The 50-day moving average is around 5,700%.

where all of the highs from the summer came in. And so that would be a very logical place for a correction to occur if we find that the earnings drive some sort of profit-taking cycle. On page five, I have that dollar index. What are your thoughts here?

Now, just as we predicted here on Macro Voices, this dollar rally has been brisk for the last few weeks. We've already cleared 103. 104 is the next obvious resistance level, and that's a major level on the Dixie in terms of where we've seen pivots in the past. So it's going to be very important to see what happens if we get to 104 and whether we get above it.

Eric, the US dollar remains in the dead center of its one-year trade range around this 103 level, and it lacks a catalyst for a big move. I think for the dollar to have any real meaningful follow through further to the upside, we'd have to really start seeing some sort of drivers of a risk-off impulse, which at least have not emerged yet. So expecting the dollar here to consolidate in this 103, 104 area into the elections is certainly the most probable outcome.

Alright, let's touch on gold.

No surprise in my mind that the correction, if you want to even call it a correction, didn't cost us much in terms of downside on price. But burning off the overbought technicals, getting us from an overbought condition back into an oversold condition, at least temporarily, not oversold anymore. That's basically cleared the way for the next leg higher set that stage. And already we see that the next leg higher appears to be underway. Yeah, Eric, the gold bulls bought the dip very,

very quickly. We continue to have the pattern of higher highs, higher lows. All the ascending trend lines continue to be in place above all of its moving averages. Price action continues to be very cumulative. Everything is positive. Now we are at a previous high. There's always a possibility of a double top.

and it rejects at this level. But there's no technical evidence that that's the case. The measured move on the upside is up to $2,800. So let's see whether the bulls can follow this through and put on another $100 on the upside. Finally, Eric, I wanted to touch on uranium, which certainly has been showing a little bit of life over the last couple of months. What are your thoughts here? Well, needless to say, if there was still any question at all on Tuesday afternoon as to whether or not the bottom was in for uranium,

I think that doubt was pretty much eliminated by Wednesday afternoon. So what's driving the massive upside in uranium stocks this week? I think it's all about not just one or two, but basically all of the big tech companies going all in on nuclear. Google's announcement to buy seven small reactors from Kairos Energy was probably the biggest catalyst that really rocked the market this week.

And I think it's important, you know, even as a person, I've been just such a big proponent of small modular reactors and advanced nuclear and so forth. I'm delighted to see Google investing in the right advanced kinds of nuclear energy and not just trying to build more AP1000s the way a lot of people are doing. So kudos to Google for focusing on the right stuff.

But let's keep this in context, folks. Kairos is basically a startup company that doesn't have a reactor. They have a design there. They're working on a prototype. You know, all of the SMR companies that are doing deals now amazingly with these big tech companies don't actually, you know, they've never built an SMR yet. They don't have any. They don't exist. They're on paper. They're going to build them. We're at a very important turning point.

But let's not interpret this as Google just agreed to buy something off the shelf. Google agreed to buy something that doesn't even exist yet, which is a very, very strong, bullish, long-term signal in terms of where this market is headed. But

Let's just keep it in context. We're not creating a whole bunch of new uranium demand as a result of Google buying something that doesn't exist. What we're seeing is something much, much more important than uranium demand. We're seeing investor sentiment finally turn around and wake up to the rather obvious fact that we've been pounding the table about here on Macro Voices for months and months now, which is that the nuclear renaissance is on and it's on fire.

strong kudos to our friends over at uranium insider justin hewn absolutely just nailed calling this bottom he did a special video on the day of the bottom from uh what a guy dialing in after the conference in in london late at night from his hotel room to do an emergency video for a listener saying guys right here right now this is it you know don't miss this

And then the following week saying, if you missed it, don't wait any longer. This is it. The bottom's in. Justin just nailed that call. So good job, guys. Thanks very much. And I'm very much enjoying the newsletter. Yeah, what is particularly interesting is how uranium companies such as Chemical continue to rip back towards their year highs as there's certainly some aggressive accumulation occurring back again in this uranium space.

Folks, just a reminder to attend Patrick's free webinar on why commodity investors might be leaving money on the table. It's October 24th at 4 p.m. Eastern Time, and you can register at bigpicturetrading.com.

Well, in this week's Research Roundup, you're going to find the transcript for today's interview, as well as the chart book we just discussed here in the postgame, including a link to a number of articles that we found interesting. You're going to find this and so much more in this week's Research Roundup. So that does it for this week's episode. We appreciate all the feedback and support we get from our listeners, and we're always looking for suggestions on how we can make the program even better. Now, for those of our listeners that write or blog about the markets and would like to share that content with our listeners,

Send us an email at researchroundupatmacrovoices.com and we will consider it for our weekly distributions. If you have not already, follow our main Twitter account at Macro Voices for all the most recent updates and releases. You can also follow Eric on Twitter at Eric S. Townsend. That's Eric spelled with a K. You can follow me at Patrick Ceresna. On behalf of Eric Townsend and myself, thank you for listening and we'll see you all next week.

That concludes this edition of Macro Voices. Be sure to tune in each week to hear feature interviews with the brightest minds in finance and macroeconomics. Macro Voices is made possible by sponsorship from BigPictureTrading.com, the Internet's premier source of online education for traders. Please visit BigPictureTrading.com for more information.

Thank you.

And the more registered users we have, the more we'll be able to recruit high-profile feature interview guests for future programs. So please register your free account today at MacroVoices.com if you haven't already.

You can subscribe to Macro Voices on iTunes to have Macro Voices automatically delivered to your mobile device each week free of charge. You can email questions for the program to mailbag at macrovoices.com and we'll answer your questions on the air from time to time in our Mailbag segment.

Macro Voices is presented for informational and entertainment purposes only. The information presented on Macro Voices should not be construed as investment advice. Always consult a licensed investment professional before making investment decisions. The views and opinions expressed on Macro Voices are those of the participants and do not necessarily reflect those of the show's hosts or sponsors.

Macro Voices, its producers, sponsors, and hosts, Eric Townsend and Patrick Ceresna, shall not be liable for losses resulting from investment decisions based on information or viewpoints presented on Macro Voices. Macro Voices is made possible by sponsorship from BigPictureTrading.com and by funding from Fourth Turning Capital Management, LLC. For more information, visit MacroVoices.com.