MacroVoices #479 Anas Alhajji: What Do Saudi Arabia & Allies in OPEC+ Want from Accelerating the Unwinding of Voluntary Cuts?
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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 479 was produced on May 8th, 2025. I'm Eric Townsend. Energy Outlook Advisors Dr. Anas Al-Haji returns as this week's feature interview guest. Anas says the press has it all wrong in their interpretation of the OPEC Plus Group of Eight's decision to increase June crude oil production by 412,000 barrels.

Anas will explain what's really going on in Saudi Arabia and the real risks posed by an escalation of tensions in Iran, Pakistan, and India.

And I'm Patrick Ceresna with the macro scoreboard week over week as of the close of Wednesday, May 7th, 2025. The S&P 500 index up 111 basis points to 5631. We'll take a closer look at that chart and the key technical levels to watch in the postgame segment. The US dollar index up 29 basis points to 9992, bouncing from an

oversold condition with retracement targets toward 101-102. The June WTI crude oil contract down 55 basis points to 57.89. Oil continued to trade along the April lows. The June Arbob gasoline unchanged on the week at 202.

The June gold contract up 166 basis points, trading at 33.74. Gold started a new breakout, but will the bulls be able to break the price to all-time new highs?

The July copper contract up 22 basis points to 462. Uranium up 318 basis points to 6980. Positive price action continues for the second week in a row. The U.S. 10-year treasury yield up 10 basis points, trading at 427. And the key news to watch next week, we have the CPI and PPI inflation numbers. The

the core retail sales, and the University of Michigan consumer sentiment and inflation expectations. This week's feature interview guest is Energy Outlook Advisors Dr. Anas Alhaji. Eric and Anas discuss market reactions to OPEC+, summer demand, and the long-term outlook for oil and LNG. 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 Energy Outlook Advisors Managing Partner, Dr. Anas Alhaji. Anas, it's great to get you back on the show and very timely because what we've had happen in the last several days is the group of eight, OPEC Plus, voted to increase production. That immediately resulted in the Western press basically going into overdrive saying, okay, look, this is war. What this means is

OPEC plus is declaring a price war on the U.S. shale producers. We should basically hunker in for much lower prices. OPEC is going to try to drive the shale guys out of business. That's the only thing this could mean.

You published a report on Saturday just after the vote that was completely non-consensus. You're on a completely different page than everybody else. And frankly, based on the tape action on Monday, it looks like you were Monday and Tuesday. It looks like you may have already been proven right. So why did you have the out of consensus view? Why do you not think this is a price war? And what do you think is going on? Going back to your Saturday report.

Sure, Eric. It is always a pleasure to be on Macro Voices. Always. So thank you very much for this opportunity. I would like to kind of take my time explaining this because it is very clear that not only the media misunderstood what was going on, even analysts misunderstood what's going on.

So let's start with the fact that, especially for the audience who are not well-versed in the oil business, that we have OPEC, which is the Organization of Petroleum Exporting Countries, which has 12 members. And then after 2016, the 10 other members joined them to form OPEC+.

which include Russia and Kazakhstan. So we have 12 members of OPEC and then we have 10 other members. So the total of OPEC Plus is 22. And what happened here is after the major increase in prices in 2022, prices start declining, inventories start building up, demand growth starts weakening. They felt that they need to cut production

to prevent a major increase in inventories. OPEC Plus met, and they did cut production. But a few months later, they realized that was not enough. They needed to cut more. Just for context, they did cut twice big time in 2008 during the recession. So in a sense, there is precedent about big cuts in the past. So when they met, they encountered a problem.

many members of the 22-country coalition refused to cut. And the decisions in OPEC Plus and previously in OPEC are made by consensus, which means that any country can say no and any country can have a veto power. So they couldn't. So eight of them decided to go for voluntary cuts, and they cut by 1.6 million barrels a day.

A few months later, they found out that was not enough. Inventories continued to build. So they went for another cut, which was a voluntary cost of 2.2 million barrels a day on the condition that they will unwind those as soon as possible. So the conclusion here is this. We have OPEC, we have OPEC Plus, and we have the group of eight, which I call the V8, V for voluntary. So we have those three groups.

The V8 includes Saudi Arabia, includes Russia, includes Kazakhstan, includes Kuwait, UAE, Oman, and some other smaller members. But the idea here is we have those three groups. Therefore, the press that focused on OPEC plus cuts are wrong because it wasn't OPEC that cut.

And it wasn't OPEC or OPEC Plus that increased production. It was the group of eight. And we have three cuts. The first one is from OPEC Plus, and the other two cuts are from the group of eight. Now, what happened is they tried to unwind the 2.2 million barrels a day quickly, and they couldn't because the market was not supportive. So every time they met, they delayed the decision.

And as you recall, they delayed for five times. Finally, they said, that's it. We are going to unwind in October 2024. But by October 2024, they realized we have a presidential election in the United States in November. So they said, okay, let's delay for one more time until we figure out who is going to be the president. So they delayed the decision until December. In December,

they made the decision to unwind the 2.2 million barrels a day starting April 1st, 2025, over a period of 18 months. So it will be gradual increases over those periods. And they emphasized the idea that those countries that overproduced in the previous year

they have to compensate for all the increase they made. So the first fact here is those who claim to be surprised by the decision to add production, it's nonsense because they already said this in December. So it should not be a surprise. So we came into April and they started unwinding production, which is the amount is about 140,000 barrels a day. If you look at the data right now, since it's already passed,

we found out that the exports of OPEC Plus declined. It did not go up. And the exports matter because that's what the supply to the international market is. Then they shocked the market when they met and they said, okay, we are going to change our policy. We are going to triple the increase in May. So they are going to expedite the unwinding of production. That took everyone by surprise.

And the question is, why? What happened? The problem at that time is the media picked up the first part of the story and ignored the second part of the story. The first part of the story, which was increasing or expediting the unwinding of the cuts. The second part of the story was, instead of spreading this return of production over 18 months, they stopped it completely.

And they said, now we are, instead of meeting twice a year, we are going to meet once every month. And we are going to decide in this meeting what to do the following month. So the media mentioned the first part of the increase in production, but they did not mention the second part, which means that they can literally stop all the increases or even cut. So here comes June and the decision for June.

All expectations in the market was that they are going to repeat what they've done in May and June. And after they did it and they agreed on Saturday that they will add 411,000 barrels a day in June, all of a sudden we've seen many analysts are surprised and they were predicting a doomsday. Well, if you go to their writings and if you go back to their tweets and everything else, they were predicting this a month ago.

What changed? They were predicting this. So the issue here is this. First of all, the increase was 140 in April, 411 in May, and on top of that, 411 in June. So we are talking about an increase of 950,000 barrels a day. Now you might tell me, well, this is a significant amount and it will lower prices. And our reply said, no, it should not lower prices because

That oil already exists in the market. That oil was the overproduction, the 300,000 of Kazakhstan and the 400,000 of Iraq and the others. That oil is already in the market. All they did basically is raise the ceiling and legitimize the illegal oil. So to answer your question, this is the first answer, that most of the oil is already in the market. There is no reason to panic because it's not a new oil coming to the market.

So that's number one. Number two, analysts missed the fact that in the oil producing countries, and if you recall from previous shows, we discussed this several times over the years. In the oil producing countries in the summer, demand for oil increases substantially. We are not talking about the consuming countries. We are talking about the producing countries. We're talking about the Middle East and North Africa, for example.

Because the demand for cooling is very high, they demand large amount of electricity. And to provide that, they need to burn a lot of oil in power plants. And based on our estimate, in the Arab world alone, that adds about 1.2 million barrels a day in the summer of demand.

What that means is whatever they are going to increase in term of production, some of it is going to be burnt inside those countries. And whatever is going to be available to the world is very little. So aside from the fact, so number one, that most of that oil is already in the market. The second one is demand increases in the summer because of the heat in the summer. And if the summer is very hot,

We might end up really bullish this summer if the summer is really hot in Middle East and Asia. The third point is very interesting and that was missed by everyone. The Hajj. The Hajj is the pilgrimage. The pilgrims, millions of Muslims from all around the world come to Saudi Arabia at a certain time of the year to perform the Hajj. And when we talk about Hajj, we are talking this year since Hajj basically is based on the lunar system.

So we cannot talk about the solar calendar, but to use the Gregorian calendar, it corresponds to May and June. That's when those millions of people traveled to Saudi Arabia and then leave. And where the increases and where they expedited the production? May and June. So what happened in Hajj? You have millions of people coming in.

The demand for gasoline goes through the roof. The demand for diesel goes through the roof. The demand for jet fuel goes through the roof. And they have to provide electricity 24-7 for two months for hundreds of thousands of hotel rooms with cooling because the area is very hot.

So the demand in Saudi Arabia because of the Hajj increases substantially. What that means is one, two, three. One, we are talking about most of that oil is already in the market. And then whatever additions is going to go for the summer cooling in power plants. And the second one is going to go for Hajj. So what is left?

So that's why on Saturday after the meeting, basically, we decided to publish this note telling people, look, you got to be very careful. This is really not bearish the way you guys are looking at it.

And even on Tuesday afternoon, a couple of days into this, all of the mainstream reporting is still very bearish. And it's basically talking about a price war. So you're saying that OPEC is not flooding the market, as many analysts are claiming. They're not starting a price war and they're not trying to intentionally force the U.S. shale producers to be uncompetitive at lower prices.

Yes, let me address the last point, the last two points. Now, what we heard in the media was that Saudi Arabia is trying to punish Kazakhstan and Iraq by increasing production and lowering prices. This is a complete nonsense and it is illogical. Why it is illogical? Because Iraq and Kazakhstan...

have been asking the group to increase production so they can increase their production. And when the group agreed, those haters basically are saying, oh, now they are punishing them. How they are agreeing with them, they are trying to help them out, and now they are punishing them. So this brings us to the second important point today, which is one of the main objectives of OPEC+, which was the main objective of OPEC before that, is OPEC unity.

OPEC cohesiveness is extremely important to the Saudis and everyone else. So we ended up with this situation. We have the unity, we have the cohesiveness, and then we have the reputation. OPEC plus without a reputation is nothing. If people do not believe them, whatever they do, it doesn't matter anymore.

So we were coming into a situation where OPEC Plus would lose credibility completely, and therefore it will be completely ineffective. And there is no way you can rescue it. Why? Because if Kazakhstan continues to increase production, and they continue meeting and asking them to compensate, and they will keep promising that they will compensate,

then mathematically speaking, there will be a day when the compensation itself is higher than Kazakhstan production. And we know that's going to be impossible for Pakistan to halt production or reduce it significantly. And at that time, no one will believe OPEC Plus at all. So one way to work around this is to increase the ceiling

And this will comprehend all the increase in production in Iraq, Kazakhstan, the UAE, and probably Russia in the future. And then there will be a gap, that the gap between the ceiling and the actual production. And they will take that, this is kind of paper barrels, and they will start claiming the overproduction in the past against this gap. And therefore, OPEC achieves what it wanted or OPEC Plus achieves what it wanted.

And those countries are in compliance. Then the last thing in the media basically was that Saudi Arabia and its allies yielded to Trump demand. And they are under pressure from Trump to increase production and lower prices. This is another nonsense idea. First of all, we do have historical evidence, especially from 2018, that they did go against Trump. They did.

So the idea that, and people who do not know about diplomacy and other things, et cetera, basically, they can say these things. But those who know, they understand. It's not like they are picturing it as Trump just picking up the phone, calling MBS and tell him increase production. This is a complete nonsense. It does not happen that way. So what happened? President Trump is going to be in Saudi Arabia in about seven, eight days, I think on the 13th.

And he's going to visit the UAE and he's going to visit Qatar. UAE, of course, is an OPEC member. And from the Saudi point of view and everyone else, here we have the leader of the world coming to our countries to discuss serious issues. And I want to discuss Gaza war. I want to discuss the Houthis in Yemen. I want to discuss Iran and its problems. I want to talk about the war in Sudan. I want to talk about the future of Syria and the future of Lebanon.

I want to talk about terrorism and other things. I want to sign contracts with the United States to get nuclear power into Saudi Arabia. I don't want oil to ruin it. I don't want Trump to come in and start spending the time talking about oil. So their objective basically is literally to sideline oil, to literally...

depoliticize oil by doing what they've done. So Trump has no way he is going to bring up oil right now. They increase production substantially. Prices are low. There is no reason for any

member of Trump's team to bring up oil in those discussions. The focus will be Gaza, Iran, Houthis, etc. And are you saying that was the intention of this action by the Saudis, is that they wanted to pave a way to clean meetings? So they just said, look, let's get oil off the table. Getting off, what I'm saying here is two things. First of all,

The idea that they want to be nice to Trump and Trump is telling them to lower prices and increase production is nonsense. It is in their interest on their own to achieve their own goals and maximize their benefits by putting oil on the side. So it's not a Trump request as much as it is in their own interest. That's number one. Number two,

This has been the Saudi policy for a very long time. They've done it with China. They've done it with India. Both the president of China and the prime minister of India visited Saudi Arabia, and they literally did exactly the same. They said, we are not going to discuss oil. Oil is out of the question.

So there is a long history there about putting oil on the side. The problem is they cannot control Trump and what he's going to talk about. So the only way you can affect Trump is to make it an unissue.

So now what we talked about basically is we talked about the justification for the increases, the justification, and I haven't talked about the increase in demand because of other reasons, because I mentioned increase in domestic demand during the summer, increase in domestic demand in Saudi Arabia because of Hajj. But when they made the decision in their press release, in the first press release, they said we did it because of fundamentals.

And then the second press release, they said because of low inventories. Now, many people basically laughed at that. But in reality, if you want to take them to court and say, well, can you prove it? Yes, they were absolutely correct. The first time on based on fundamentals, the fundamentals support them. The second one on inventories, yes, inventories are down. And why? Because when they unwinded the production, they put two conditions. They cannot talk about prices.

So since 2016, the lawyers told them, avoid talking about prices because you don't want to have problems in the United States with the Sherman Act. So they don't talk about prices. So they put two conditions. The first condition is major decline in inventories. And the second condition is a large increase in demand. On the first one,

everyone knows that inventories are very low. So they achieved that. On the large increase in demand, this is debatable. But among all the forecasts, OPEC remains the most optimistic about growth in all demand. But this is really not the big story. The big story is we are not talking about OPEC. We are not talking about OPEC+. We are talking about the V8 or the group of eight.

The group of eight did see increase for their own oil. How? Because the additional sanctions on Russia and Iran and Venezuela scared some companies in China, India, and other places. So those scared companies, they were afraid that this is serious, although it's not, but they did not know.

So they've been calling the Saudis and the Kuwaitis and everyone else. They said, we need more shipments. So they did see increase in demand. And then we ended up with a situation, kind of a very strange situation, where President Trump all of a sudden said, we are going to impose tariffs on countries importing Venezuelan oil. That was very effective. And I will explain why it was very effective in a minute.

It was very effective. Venezuela's exports declined by 26% and China and India stopped importing from Venezuela.

Now they are looking for alternatives. When they look for alternatives, where are they going to go? They are going to go to the Saudis. They are going to go to the Kuwaitis. They are going to go to the Russians and everyone else. So they did see increase in demand, regardless of our views, whether demand was strong or not, or we have demand growth or not globally. But for their own oil, they did see increase in demand. But they knew that the tariffs and tariffs

All the confusion that is caused by President Trump policies and the change in the goalpost every hour and every day, they knew this is going to affect economic growth and therefore is going to affect demand. That's why they chose to meet monthly to assess the situation, knowing that this increase in demand is temporary.

The increase in the summer demand is temporary. The increase in demand because of Hajj is temporary. And therefore, they have to worry about the future demand. So our expectation right now, Eric, probably you will like what I'm saying right now, is that once the visit of President Trump is over and there is more clarity by next month about various things,

Here comes the meeting in June for July. The expectation is that they will reduce the increase. So they will revert to the 140 they increased in April. So it's not going to be the 411. And there was a report from waiters talking about them, about the V8 increasing production every month by 411 until October.

I was told from multiple sources that this is fake news. They never met. They never discussed it. There was no discussion. They don't know. My expectation is that whoever came up with this, he just took the remaining 2.2 amount and divided it by 411, and they ended up with October. That's it. But there was no discussions among the group.

on July and the period after that. So our expectation is that they will revert to 140. They want to get rid of that compensation because compensation became a cancer, a cancer that is growing every day that's going to destroy the reputation of OPEC Plus, and they want to get rid of it as soon as possible.

And they can manage this through 140. And that will be by July, it will be more than a million barrels addition that should cover Kazakhstan and Iraq.

additions and there should not be any problems in the market. Okay, I've got the message, but the one piece that's sort of missing in my mind is, okay, are we about to enter an armed conflict between the United States and Iran? And if so, could it be that what we're doing here is essentially priming the pump for a shortage that might be coming up?

What's the outlook? What do you think is going to happen next with the Iran risks? Yes. Just before the show, before we started the show, the news came out of a major Indian attack on Pakistan, which is, I think, one of the most, it's more serious than the invasion of Ukraine, by the way. This is big. And this by itself is going to keep the U.S. busy

Big time. And Iran is not going to be an issue at all if there is a war between Pakistan and India. Because if we have a war between Pakistan and India and then we have another war next to Pakistan and Iran, I mean, this is World War III. That's what it is.

And Pakistan and India are both nuclear states, correct? Correct. So I do not think that the U.S. will attack Iran. They might resort to various types of sanctions that are usually ineffective. But we got an announcement today from the foreign minister saying that they already scheduled a meeting, which means that there is a breakthrough plan.

in the negotiations where they are going to meet again. So I don't think there will be an attack on Iran.

Honest, I want to go back to the election and two predictions that you made immediately after President Trump was elected. The first was lower oil prices. You thought President Trump was going to want lower oil prices. It would be bearish for oil prices. You've clearly been proven right on that. So congratulations on the call. But the second call wasn't so obvious to me. You said also that President Trump's election was

was bearish for U.S. oil production. Now, that doesn't make sense to me because if anything has ever been bearish for U.S. oil production, it was the Obama administration, I mean, literally making a sport out of trying to sabotage the oil industry. It seems to me that all that President Trump had to do was just not

be an antagonist, and that by itself should have increased U.S. production. So why is it that you're bearish on U.S. production as a result of President Trump being elected? And what's the outlook? Here we have several issues. I'm going to talk about them one by one. First of all, because he wanted lower prices, that by itself is a big problem for all U.S. oil production, not only shale, including offshore.

So that desire for low oil prices is a big problem. But regardless, we have a serious problem with his promises of increasing production substantially. Whether it was Trump or others, it will be the same, which means that assume that oil prices go up to $85 tomorrow and they stay at $85 for the rest of the year. Still, U.S. production cannot increase substantially. And here are the reasons.

Number one, when we have the growth during the first Trump term, it started with interest rate as zero in 2015. Even after the increase in interest rates in 2017, again, this is during Trump's first term, interest rates today are three times that level. And we all know that shale grew because of free money. And that's not the case today.

So that's number one, interest rate. The second problem is the structure of the industry changed substantially in the last 10 years. Earlier, as you know, my background was in private equity. And private equity, literally, I mean, we're talking about shale and everything else in the oil industry in North America. The model, when shale started with small companies and medium size, the majors, the oil majors came in late to the show.

So those small companies, basically the way they grew was you go, you get money from private equity or from a bank and your job is literally to drill, baby drill, increase production, increase reserves. And then you sell your company to the bigger whale or bigger fish. And then you start a new one and you repeat that and you repeat that and you repeat that.

Cash flow does not matter. That's why a lot of people miss the idea about shale because they said, well, all of them are losing money because cash flow was negative. Yes. But when they put $200 million into the company and they sold it for $1.5 billion, you did not see that $1.3 billion that they made because they already sold it and you did not see the money they made. All you saw basically is the recorded negative cash flow.

But the model was drill, baby, drill. That's the only way you make your money. You make your money by selling your company, and then you take the money and start a new one, and you sell again and again and again. Now, most of the shale basically is controlled by the big companies, by the oil majors. So the model is no longer there. So between no interest rate, lack of funding, and the model change, we are not going to see that drill, baby, drill like before. So that's number two.

Number three, as everyone knows, decline rates in shale are very high. So if you look at conventional wells, the decline rates are between 3 to 6%. The decline rates in shale is 40 to 70%. So if you look at the amount of oil we need to replace every month today,

It's about 600,000 to 700,000 barrels a day every month. If you add that on a yearly basis, you have to multiply that by 12. So we are talking about millions of barrels that we need to replace every year just to keep production flat, which means most of the investment will go just to keeping production flat. Little investment will go to growth.

So, of course, we have other factors too. But these are the main factors that will prevent anyone, not only Trump, any other president from increasing production substantially. As we reached record high in terms of production, the replacement because of the declines is also record high. So we have a massive amount of investment will go to replacement.

and we have the change in the model, and then we have the higher interest rate. We are not going to go anywhere. Now, when it comes to Trump, he wanted low prices, and prices are low, and this is not going to help either. So that's why we are not going to see this increase in production. That does not mean, by the way, we are going to have a major decline.

One of the, I think I tweeted earlier today, it is very strange that the same people who predicted that Russian oil production would decline by 3 to 5 million barrels a day, they are exactly the same people who are predicting that shale will decline by 2 to 3 million barrels a day.

Well, Anas, doesn't this upend a conversation that you and I have been having for at least five years now, which is we've talked about the global spare capacity issue where, you know,

It's not like the old days where OPEC had plenty of spare capacity. Most of the OPEC countries are already producing at capacity. There's only three or four countries within OPEC that have significant spare capacity. And we talk about, boy, does that mean, you know, at some point, you know, we're headed for the next major oil price, you know, crisis, $250 oils coming next year.

And the answer was always no, because U.S. production is kicking ass. We're seeing so much growth of U.S. production that it's compensating for everything else. Declines in the Middle East, you know, shale declines, whatever. They're making more new shale wells so quickly that all the other stuff didn't matter. It sounds like you're saying the U.S. shale boom has finally played out.

And it's not completely over yet, but the ability to make up for declines in the rest of the world is ending now. Is that right? That's absolutely correct. But let's remember the following. That's big news. That's a big deal.

It is, but let's remember the following. Although, if you look at the last 15 years, sub-Salt in Brazil was not there. Guyana was not there. And now in the future, Namibia basically was not there. And now we might end up with something big in Namibia. So it's not going to be the United States. Probably it's going to be somewhere else.

So we will see how that's going to play. But you are absolutely correct. If we are not going to find the replacement, then we are going to see a major problem. But before this happens, and as we discussed before, my issue is not

the lack of spare capacity. By the time we are going to consume everything we have around the world and demand will outstrip the available capacity, we are going to have a bigger problem. And the bigger problem is the failure of some of the green policies are increasing the demand for oil, natural gas, and coal above all expectations. So we are going to see a rise in prices even before we reach that point.

of demand outstripping the capacity that exists. And you can see it all around the world. The retreat from climate change policies is all over from governments and companies, et cetera, just all over the place. The third point is really kind of striking. I mentioned earlier that I would like to talk about Venezuela a little bit because it is related to the discussion. And I want to clear up a point that is important.

President Trump threatened that he will impose tariffs and sanctions on countries that import Iranian oil. And the reason why he said this, because sanctions, as we predicted a long time ago, do not work. So it is indirect admission that all those sanctions on Iran did not work. And therefore, we need to impose sanctions on the countries that import the Iranian oil.

But they did it after they saw the success in Venezuela. But they missed a very important point. With Iran, it was very clear from the beginning what the Chinese did. The Chinese government asked all its oil majors who are listed in the stock exchanges of all the European countries and in the United States, who deal with U.S. and European banks, who operate in more than 40 countries,

told them, look, don't mess with the sanctions. So stop importing Iranian oil directly. And they forced them to do that. So they stopped. And then they asked the companies, mostly they are the teapot refiners and others, some of them are shell companies,

since you have no presence in the West and you have no presence in the US or anywhere else and they cannot punish you, you go to Iran, get me that oil, bring it to China and then sell it to the oil majors. And they built a system around this. And then they built another system for the oil majors where they can use other countries

A third country like Malaysia, for example, where the ships will go to the waters of Malaysia and then there will be ship-to-ship transfer. And then the oil majors can get it and claim, I did not get it from Iran. It was sold to me as a Malaysian oil. And the joke always among analysts is that the exports of Malaysia are larger than its production.

In case of Venezuela, it's different. What happened in Venezuela is those oil majors of India and China already got authorization from the Biden administration to operate in Venezuela and ship the Venezuelan oil. So they don't have the same system they have with Iran. So when suddenly President Trump imposed those tariffs,

Then those companies got stuck because they operate in the United States. Trump can get back at them at any moment. So they get information from their government, stop importing from Venezuela. What does that mean is you retreat, we will send other companies to buy the Venezuelan oil. From experience, we studied this. It takes about six weeks to three months for that replacement. And then we end up shipping the Venezuelan oil the same way the Iranian oil is shipped. By the way,

And the reason why President Trump imposed the tariffs on the importers of the Venezuelan oil, because he had two strong cards against China in his hand, LNG and oil. And he woke up one morning and he found out that China is not importing any LNG or any oil from the United States. And he lost the two cards. And the only replacement was to punish China and Venezuela.

Is that important? Absolutely, yes. And if you recall, we talked about this several times in the past. Crude quality. The Venezuelan oil is heavy crude. So some people may say, well, Venezuela does not matter because they export only 900,000 while oil demand is 104 million barrels a day. That's nonsense because that's 900,000 is heavy crude. And you have to count that out of the heavy crude market, not of the total crude.

oil liquids in the market. So what happened is when Trump imposed those sanctions in the fourth quarter of 2018, we were able to find the replacement easily by importing Maya crude from Mexico. And then President Biden gave the exemption to Chevron and Trump came in and extended that. So we started importing about 300,000 barrels a day of heavy crude from Venezuela.

And now, if we stop this, President Trump extended the authorization until May 27th, I believe. And we will see whether he's going to extend it or not. I think he will extend it. He has no choice. But if he does not extend it, how are we going to replace those 300,000 barrels of heavy crew? Remember the following. China is looking for replacement already.

India is looking for replacement already for the same crude. And the US will be looking for the same crude. Where we can find this crude? Colombia? Yes. But we already have some militias basically bombing the pipelines in Colombia. Peru or Ecuador? Well, they have mudslides and some of the pipelines are not operational anymore. So where we are going to go? Canada. But we already have so many problems with Canada right now. So what to do? And one of the ironies is that

In 2002, in April 2002, when we lost the Venezuelan oil because of the PDVSA strike and then the coup against Chavez, and U.S. refiners lost the heavy crude, and they started looking for replacement. And if you look at the world map and plot the replacement, it's just amazing, just amazing. So imagine you have the whole map in front of you.

and you have a raindrop in the Gulf of Mexico. And you know how when you have a raindrop in the water, how those circles form? That's exactly what happened. They kept extending those circles and buying and buying. And finally, they got heavy crude from Syria. Is this important? Well,

Trump is going to Saudi Arabia in seven, eight days. He is going to meet the new Syrian president. So that's why I love energy is the interaction between politics, economics, and everything else is just amazing. But the idea here is when it comes to this heavy crude issue, it is a big, big issue. And that's why we've seen the differentials between heavy and light basically shrinking because of this.

The bottom line is we need the Venezuela crude, and it will be very tough if President Trump does not extend the Chevron authorization. It will be very tough for us to find a replacement.

Okay, before we close, I just want to go back to the really high-level, longer-term outlook that you have. Because going back a few years, you and I would talk about a very bullish, long- and medium-term view that you had for both oil and LNG. And then...

As we got into the Ukraine crisis and so forth, you kind of backed off of that and said, OK, look, the world is changing. Now is not the time. Still bullish in the long term, but it's kind of on hold for a couple of years. Are we coming off of hold now? It sounds like we are. The problem we have, and let me kind of be very clear on this.

When we made those forecasts, we were assuming that global economic growth will be about 4.6%, like the historical average. And all of a sudden, COVID comes in and everything collapses. And then we have the recovery.

And the recovery lasted only for a short period of time. And then everything tanked. You look at U.S. growth even in the last quarter, you see what happened. You look at Europe, you look at China. China basically was not even in the picture when we were looking at slow economic growth. I know a lot of people were talking about real estate and the collapse, but that's been going on for 25 years.

So the slowdown in China was a big surprise for us. So everything is on hold. Everything got delayed, but the thesis has not changed, especially for the LNG. The LNG story is really a big, big story. Just to give example to the audience here, all of a sudden, all of a sudden, three countries, they were not in the picture at all. They were not in any outlook, period.

Now they started importing LNG. Ukraine was not on anyone's book. And Syria was not even there. And Iraq. No one believed that Iraq would be importing LNG. And now basically we might end up with Morocco being added to the list. So you have those four countries that were not even anywhere in the demand outlook. And then you look at Egypt. Egypt was an exporter of LNG.

And all of a sudden now, they are a big importer, and we expect their imports basically to increase year over year. By the way, speaking of Egypt, there was a story that we talked about this morning, and we are going to publish it later. We published it in Arabic, but we will publish it in English later on.

Shell basically operate an LNG plant in Egypt, and they were able to get some gas and have an LNG shipment. So this is near the Swiss Canal on the Mediterranean, near Alexandria. And the buyer is Taiwan. So logically speaking, if you want to export that from Alexandria to Taiwan, you go through the Swiss Canal through the Red Sea. It did not.

that the carrier literally is going now, as we speak, around Africa. I mean, it's adding like, I don't know, 5,000 miles to it or 5,000 kilometers to the trip and not going through the Swiss Canal and not going through the Red Sea. So the question here for people to think, I'm not going to discuss it today, but this is for the audience. Explain this. Why

Russian crew, the Orals, all of it go to Asia through the Swiss Canal and the Red Sea. And the Russians have no problem with the Houthis. Yet, Russia cannot send a single LNG tanker through the Red Sea. Qatar was accused of supporting the Houthis.

So they have no problem with the Houthis. Yet Qatar sends LNG to Europe around Africa, and they couldn't send a single LNG tanker since January 2024. Why? And here are more questions. Why President Trump all of a sudden start talking about the Swiss Canal, and he wants free passage in the Swiss Canal? He wants free passage in both canals, I think.

Correct, but since we are talking about the Red Sea, that's why I brought it up there. By the way, on the Panama Canal, for the first time in history, we did not see this before. We are seeing LNG. This is a true story. You can see it in my timeline on X. Chile imports LNG from the United States. A carrier will leave the Gulf of Mexico or Gulf of America right now and will go around Mexico.

South America, completely around South America, and then go up to the terminal in Chile, instead of going through the Panama Canal. At the same time, this tanker was going up north. Another tanker from Peru was going south, turning around South America and going to Europe. And the distance between the two countries is just like a few miles. They can trade with each other and everyone will be happy. And no one used the Panama Canal.

Anas, Iran's production and exports rose by a million barrels a day during Biden's term, despite the sanctions that were imposed. Please explain how they achieved that and why Trump's stricter sanctions, at least I perceive them to be stricter, even with secondary sanctions and tariffs, you say are not going to work. Why not? Sure. Sure.

So let's go to Biden's time. Biden came into the office with the promise that he wants to stop the sanctions of Trump and go back to the 2014 nuclear agreement that he and President Obama signed with Iran.

So he wanted to go back to that. And they wanted to negotiate with the Iranians in Vienna. But the only way they can negotiate with the Iranians if they really turn the blind eye to the sanctions. So for the first year of Biden's in the office, they really ignored the sanctions on the hope that the Iranians will stay at the table, negotiate a deal and end up with a deal. After almost 10 months,

They reached dead end. And they found out that the Iranians are not serious. And by the way, this is a side point. The objective of the Iranians is just to hang around until they have the nuclear bomb, period. Whatever the cost is, even if they lose Syria and lose Lebanon and they lose Yemen, it doesn't matter. They'll want to wait for that bomb. Anyway.

So he wanted to reimpose or strengthen the sanctions or enforce the sanctions on Iran. By the time he and his team were studying this, Putin goes to Ukraine. And all of a sudden, everyone is talking about sanctions on Russian oil and the loss of three to five million barrels a day. And then Biden got stuck. He said, I cannot impose or enforce the sanctions on Iran because I need the Iranian oil.

At the same time, he wanted to release oil from the SPR. As you know, he released the 180 million barrels from the SPR. The Iranians were very smart. The Iranians already had 80 million in storage. They call it the floating storage. They literally organized this with the Biden administration and they released oil along the SPR. So the release was 180 plus 80.

So that was a massive amount of oil. Then in the third year, when prices now declined and the Iranians basically are misbehaving, he wanted to enforce the sanctions, but it was the campaign time for the re-election. And he does not want prices to be higher. So he literally turned the blind eye again to sanctions and the Iranians were smart enough to increase production and exports. That's how it happened.

But Trump comes in, he enforces the sanctions, and then he came up with the idea that they wanted Iranian exports to be zero, literally zero, which is a complete nonsense. Let me give you a couple of examples here. The government basically been fighting tax cheaters for over 100 years, and we have more tax cheaters than ever.

The government has been fighting the drug cartels for 50 years, spending billions of dollars every year, and they still smuggle the drugs to the United States, and we have more people on drugs than ever. If the United States cannot control the tax cheaters on its land and cannot control the drug trade on its land, it will control oil on someone else's land? So the idea of zero is a complete nonsense. But let's go back to the basics.

The Trump administration, when it imposed the sanctions on Iran in late 2018, Iran's production and exports declined substantially in 2019. And now they think they can repeat that. And what I'm saying is, no, you cannot repeat that because the reasons that existed at that time no longer exist. One of those reasons is that at that time, Iran was exporting to more than 20 countries.

and after imposing the sanctions, some countries stopped importing from Iran. Others wanted to import from Iran, but they want to abide by the sanctions. The sanctions are not on oil imports. The sanctions are on payments to Iran, which means that you can import oil from Iran, but you cannot pay them for it. You have to open an escrow account,

and put it there, put the money there, but you cannot give it to the Iranians. And the Iranians said, what the heck? I am going to spend money on producing this oil. I'm going to spend money on ports. I'm going to spend money on shipping it, and then I get nothing. I am not going to export. So part of it basically was the idea that they don't want to export to those countries. The situation changed because Iran has only one customer right now, China.

and they have a payment system, which is the Chinese payment system. Those 20 countries that were subject to Biden's do not exist anymore. And China is not subject to Biden. So that's number one. Number two, one of the reasons for the decrease in exports at that time was they were exporting to 20 countries, various types of crudes. When those 19 countries, let's say,

did not import from Iran, Iran had this extra crude and the Chinese refiners told them this quality of crude I don't need, I cannot buy from you. And the Iranians told them, okay, what qualities you need? And the Chinese basically specified the qualities. The engineers went around, they found the fields that produce the same quality crude that the Chinese want. And they literally avoided this problem of crude quality.

before. So the payment system changed. It's one country instead of 20. The crude quality issue is no longer there. They perfected the system of smuggling this oil. So there is no reason for it to decrease.

That's the story. Well, Anas, as always, I can't thank you enough for another terrific interview. But before I let you go, I want to talk about a few topics that our listeners always bring up. One is speaking engagements. We get so many requests for where and when is Dr. Anas speaking. And I know most of your speaking engagements are for private audiences that don't let the public in.

Do you have any that are open to the public? If so, when are they? And also, where can people find out about the newsletter and the other things that you offer? Sure. Any public speaking basically is happening through spaces on Twitter or podcast. There is no actual speaking engagements. All my speaking engagements are private events and conferences that are private.

And those who are interested in inviting me, they can go to my website. There is a page there. They can fill out the information and they will get a response immediately regarding this. Okay. And as far as the newsletters and your sub stack and so forth, you tell us what you offer both for professional and for retail investors.

Yes, we have three different subscriptions. Basically, we have the newsletter that is intended for mostly high net worth individuals and institutions. And it's in-depth, just like the one, the report we published on Saturday. It's in-depth analysis. And that's the newsletter. And then we have the daily energy report. The daily energy report is a very unique concept.

We have a very large number of subscribers there. It's not that expensive. It's mostly for individuals and firms and companies, but most of our members basically are individuals. And then we have the subscription on X on Twitter.

We put some small stuff there. It's a very minimal subscription, basically, just like $10 a month or something like this. It's very minimal. But I put all the kind of differentiated research and work in those newsletter, the Daily Energy Report, and the X subscription. 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, it was great to have Anas back on the show. Now let's get to that chart deck. Listeners, you're going to find a download link for the postgame chart deck in your Research Roundup email. If you don't have a Research Roundup email, that 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. Okay, Eric, let's start off with the equity markets. What are your thoughts here?

Well, Patrick, we've had several daily closes just barely over the 50-day moving average on the S&P, but so far no upside acceleration above the 50-day moving average, despite that we have closed over it for several days in a row now. 58.11, that's the 100-day moving average, is the next target higher that's obvious on the S&P chart. Paul Tudor Jones and other notables are starting to call for, okay, that's it, this is the top

time for a new round of lower lows for the S&P. All I can say is I'm hedged for that. If it happens again, I'll be prepared.

Well, Eric, what's on everyone's mind is asking the question, is this a new bull market or is this a bear market rally that's going to trap all investors? Now, I have done in the past the analog of comparing the bear market rallies of all the previous declines and these bear market rallies retracing 50 to sometimes as much as even 78 percent

of the prior drop over a span of 30 to 60 days is quite common. In fact, it's the base case. We are at a situation where this is not yet proven that this is a bull market. All we've had was a liquidity event to the downside, a scare from the tariffs, and

And now a reflexive rally that has been pretty significant. The question now is, will this roll over? Now, I think that this could easily last into the middle, into late May. And maybe we can even see 5800 temporarily on the upside of the market.

But I still don't see any reason to believe that this is a new bull market. I think that as soon as we've exhaust the upside and the systematic buying that's coming in here from vol contraction, other things that is happening will inevitably peter out. And then the market will be in a position to start rolling over.

I don't think it's an immediate risk. There is no big announcement. I mean, maybe the inflation numbers everyone's going to be watching next week are going to be important. But I generally view that the market has a capped upside, let's say about 100, 150 points.

But it is the path of least resistance on the short term for it to go higher. Inevitably, a return back down to the lows of April, I think are in store going into the second half of the year. It's just a matter of timing. When does this upside impulse run out of steam? All right, Eric, what are your thoughts here on the dollar?

Well, Patrick, we're consolidating between 99 spot 50 and 100. So just barely below 100. I think the market's likely coiling up here for the next move up or down. My base case is that will be a move lower to the downside, continuing the well-established downtrend.

On the other hand, you know, we do have to be on the outlook for an overdue counter trend rally here. So a counter trend relief rally could happen at any time to the upside. Take us back up five points higher before this bear market resumes. But I do think that we're in a significant downtrend now. That's the major trend. So that's my base case for the next move.

Well, Eric, we had an incredibly oversold dollar and it was due for some sort of a retracing bounce. A move back to 101, 102, where the 50-day moving average is a very typical reaction to an oversold condition. And yet the dollar remains strong.

so structurally weak the bounces have no follow through there's no buying at this moment you want to respect that the prevailing downtrend is the dominant one now do I think that therefore there's another leg down coming imminently well it doesn't necessarily mean it has to be imminent but at least so far there's not a very good bull case to be made from the price action itself

At this moment, some short-term strength back to 101.02 would be a given. But the longer this takes to get up there, the more likely that going into June, July, another round of weakness can emerge. All right, let's move on to crude oil here. Well, Patrick, Anas already covered the fundamentals brilliantly. Patrick, so let's hear your technical analysis view of this oil market.

Well, while there certainly is a bull case to be made inevitably on crude oil, the price action continues to be incredibly weak. We continue to trade along 52-week lows, every rally failing and clear distribution still dominant. There are measured moves down into the low 50s, and so this continues to be a vulnerable market on crude.

the short term now overall I don't think crude oil is gonna spend much time down here and therefore inevitably if it gets oversold enough and gets low enough I will certainly dabble with buying the dip

looking for a reaction. I think that overall, they're much more likely that we're going to see consolidation in the mid 60s for a better part of the year. And so this temporary dip down into the 50s will ultimately be a buying opportunity. But

On the very short term, it likely can still get worse. At least there's no evidence on the charts that there's any new accumulation or new buying underway. So we have to respect that the prevailing downtrend remains the dominant one. All right, let's touch on gold here, Eric.

Well, Patrick, as a gold bull, I would frankly prefer to see this bull market slow down a little bit just to reduce the blow off top risk. But it seems that it wants to just buy every dip. And hey, the trend has been our friend. I'm not going to fight it.

I do remain very bullish long term, and I'm hopeful that this bull still has plenty of room to run to the upside. But I'm increasingly concerned that we are headed for a blow off top sooner or later. I think potentially still a couple thousand points higher before we get to it. But it's coming sooner or later. It's famously difficult.

to anticipate and predict when a blow-off top is going to occur. So I think we're starting to gamble with a much more challenging trading environment here.

Well, gold didn't waste any time bouncing off that 3,200 area and attempting a retest of its previous highs. Now, we had a couple of days here of a little bit of selling, but as far as I'm concerned, as long as it's bought on dip and it stays above 3,300, then a breakout to an all-time high is the path of least resistance. This remains a

primary bull trend. So the question that many have is, well, where is the reversal point? What would have to happen for gold to begin a bigger correction? Obviously, there would have to be some fundamental macro conditions like Chinese buying and other things that would have to accompany it. But to me, a breakdown of $3,200 remains the kind of pivot level where a bigger and more extended distribution cycle could

could get underway. That also is where the 50-day moving average is. And so it's a very logical place to watch for the pivot. So we're watching at this point whether the weakness of the last couple of days is bought on dip for that prevailing trend to break to a fresh new 52-week high. All right. And let's wrap up, Eric, with just taking a quick look at uranium. What are your thoughts?

Well, Patrick, with the major ETFs up more than 30% off their lows, with URNM closing above its 100-day moving average for the first time since early December, I think it's pretty clear now that this bounce has legs. At this point, I think a major downside, broader market risk, if Paul Tudor Jones is right about the S&P eventually moving to new lower lows, that's going to be the big threat to uranium stocks is broad market pressure.

All other factors look bullish to me at the moment.

Now, Patrick, the ultimate sentiment indicator I'm waiting for is to see you tell your big picture trading members that it's time to go long URA call spreads, which is the way that I'm guessing that you would play the upside in this market. I know you've been watching for much more of a technical reversal and clear signs of upside accumulation patterns. Are we seeing them yet? Is it time to go long? When are you going to move on those call spreads? That's what I want to know.

Well, Eric, this is the first positive price action we've seen in uranium in a while. First thing is, is that when the spot physical uranium, which is on page six, the chart broke down to lower lows in April, it would did so just by on liquidity flows and the discount it's trading out to its net asset value. But the U308 spot prices actually stayed flat. Now,

What we then saw was once the selling pressure was alleviated, that we've now rallied above the March high and are now sustainably trading above the 50-day moving average for the first time since September of last year. The big puzzle to solve here, is this a bigger turning point or is it just a bear market rally like we potentially are seeing in the equity markets?

At this moment, what we really want to see is whether the bulls defend the price action when we inevitably meet a little bit of selling. But this certainly has the backdrop of what could be a basing and bottoming formation. But

As far as I'm concerned, it's going to take a month or more of price action development to really get a sense as to whether or not this one year decline in uranium is finally over. And so that's the puzzle we'll be trying to solve here in the many episodes to come. Last thing though, Eric, I wanted to just touch on the natural gas chart. I have on page seven, the natural gas ETF, UNL, which owns a 12 month strip of

of the natural gas contract. So it gets all of the contango and backwardation of the seasonality into a much more stable chart. And what we had was a very bullish breakout this year in natural gas prices. They were up close to 30% from their November lows.

Now we had a dip here throughout April and it appears that that was essentially bought on dip at this point. We're getting back above the 50-day moving average. It was more or less a Fibonacci retracement. It is worth watching whether we're seeing a brand new bull breakout in natural gas prices. If this follows through, we could see this thing trading to $14, $15 a

where it's been trading in 2023. Let's watch whether or not this breaks out. Folks, if you enjoy Patrick's chart decks, you can get them every single day of the week with a free trial of Big Picture Trading. The details are on the last pages of the slide deck, or just go to bigpicturetrading.com. Patrick, tell them what they can expect to find in this week's Research Roundup.

Well, in this week's Research Roundup, you're going to find the transcript for today's interview and as well as this chart book we just discussed here in the postgame, including a number of links to articles that we found interesting. You're going to find this link and so much more in this week's Research Roundup. 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 account on X at MacroVoices.

macro voices for all the most recent updates and releases you can also follow eric on x at eric s townsend that's eric spelt with a k you can also follow me at patrick ceresna on behalf of eric townsend myself thank you for listening and we'll see you all next week

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