An extended U.S.-Iran ceasefire is the 'worst-case scenario' for energy: Rory Jo [5:00-10:01]

That, you know, at this stage, we're not going to la price those higher prices until the scarcity is screaming at us in the face. I think that's going to have to come by US data, given how timely and transparent it is, and at that stage, the rate it were currently drawing down, probably more like mid to end June, early July, before that scarcity kind of is unavoidable and undeniable. And is that the point, is that the, is that when we see this disconnect between headlines and reality, physical market and paper market sort of dissipating and these two markets converging? Well, so I think one thing that's really interesting here is that the main element of the physical to paper dislocation was essentially just massively steep backwardation in the market. My backwardation, we basically just mean a premium on mirror data deliverable commodities. What we saw through the end of March and the early of April, when the markets were at their high, when we saw on April 7th, the day that dated Brent, the physical benchmark, had an all-time nominal high of over $144 a barrel. That was the date the ceasefire was signed. After that, because you removed some of the fear of those upstream attacks, some of that backwardation and some of that panic in the physical market did actually settle down. I think at this stage, given the reduction in Chinese imports, given the flood of inventory from SPRs in the US, in Japan, etc., we do have a sufficient volume of crude based on all of our physical market indicators. It's still tight, but it's not crisis tight anymore. But I think the longer this goes on, the more all of those other systems begin to run out. And that is where the tight becomes crisis tight much more quickly. And even in this moment, we're still drawing down stocks. So things get worse and worse every week. The longer this goes on. Rowan, let's talk about the drawdown of those stocks and what it means for the markets. I think it was noted here that actually the Chinese, like the United States, have also been drawing down quite a bit from their reserves to try and make sure that they can actually remain secure. Just how big is this petroleum reserve of China if we have any estimates of that? And again, how is the release of it keeping Chinese demand satisfied and price shops fairly controlled, given they're the second biggest of that mistake and consumer of oil in the entire world? Yeah, the second biggest consumer behind the United States and largest import by a kind of a long shot. Essentially what you're doing here, in terms of the size, the visible stocks we can see in China are upwards of like 1.2 billion barrels. They've got a lot of oil in their system. What's notable is that's the oil we can see. That is not actually drawing down as rapidly as what I was mentioning. And that's what's curious about this moment is that what we can see of Chinese stocks aren't drawing that quickly. But the behavior of the overall system implies that we're getting injections of inventories from other less visible places. Now, when we're talking about the inventory we can see, the important aspect here is that a lot of most crude oil inventories, their big storage above ground tanks, they have floating roofs, and you can see how much oil is in them based on satellite imagery. And you can kind of derive that via estimation. What you can't see is underground cavern storage. Now, a lot of a good portion of China's underground storage, likely in the hundreds of millions of barrels, is underground. And that's not visible. That's what we think they're likely dumping into the market right now and supporting things. Same with product inventories, gasoline, diesel, LPG, etc., also not in floating storage tanks because of quality concerns, because gases will get off, let off, etc., also less able to see that. Altogether, what this essentially means is that we still have very, very large blind spots in the market. But when everything else that we can see is behaving in a certain way, it can tell us that we're probably getting weird amounts of supply. Because again, if the level of demand contraction is what is currently implied by the data, we would expect to see that in flight activity and truck transits in inner city, China, Chinese congestion. And we're just not seeing any of that data yet. Right, so looking at it, about 101 million barrels of global oil consumption every day, China, about 16 million of that, the US about 19 million, about that's about combined, say 35% from the two biggest sources that are subsidizing oil or try to steady oil through their reserves. If that's the case, should oil actually be about 35% higher than it should be if these subsidies or these reserves are released? Is my math, math, and up Professor Johnson? I think that essentially prices are going to be a function of commercial inventories. And you can think of a strategic inventories, not as an inventory per se, but as a strategic discretionary source of supply and demand. So when you're drawing an inventory, the market interprets that as barrels that didn't otherwise expect to have, and it's effectively a new supply. What that will do