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00:00Here we go. Bob. Four hundred thousand. As consensus was expected no press conference. No communication. Two things go to peace goes through my mind. A practical pragmatic response looking through Omnicom. So you add four hundred thighs and always there a hint of politics and leaned on from the US here. Good morning. Good morning and happy new year. No you know what this is about. No drama. Keep your heads about you know when all others are losing theirs. You know you saw a little bit of panic in Washington the last couple of months and as PR releases and threatening you know companies with anti-trust suits etc. OPEC plus is keeping their cool. They have a flexible policy. Are they resisting calls to accelerate the tapering. On the other hand they didn't hit the panic button when Omicron emerged. They're going to say you know what it's not clear that demand is going to get hit as hard as the restrictions will be as hard. So you know what I don't think is politics going on. I think the White House today man as you know expressed gratitude for what OPEC plus is doing. But they are just keeping it cool. Everyone's in agreement. Proceed with the plan and if necessary adjust. So it's sort of no drama is the mantra right now. When I look at the market and it's quite tight I mean I put this in my market minute which is the front spread. The March April spread and the DAX DAX spread both in backwardation both becoming more and deeper into backwardation. How tight is the market. Bob. You know super tight. But you have to look through that and I think opaque plus is looking through that. We just had a massive destocking in the second half of the year draws of 1 2 million barrels a day in the third quarter. About one point one million barrels a day in the fourth quarter. So no question. And you know what. The speculators the financials are coming back. And I think a lot of folks are itching to take on the Biden line at eighty five dollars and so forth. But I'll tell you I think OPEC plus like we and I think other barrel counters are looking into this year and seeing builds builds that will put inventories back into a normal range later this year. We have supply growing twice the rate of demand this year and that's with healthy demand growth. And so I think folks are saying yeah it got really tight last year. We need builds now. But not to oversupply the market just to put us back into balance. I think that's what folks are aiming for. And that's why I don't think you see this bullishness among the OPEC plus ministers. That is reflected in the financial markets and the spreads you're talking about. OK. Then does that cop out. Well I can get to trading a brand at the moment. Seventy nine seven. I call it eighty dollars for cash. Bob let's let's not. Let's not disagree over twenty five cents. We're trading at eighty dollars in Brent. If we normalize on the supply side do you believe that that brings us dying to ward 70. Give me your call on a normalization of balances. Yep. A normalized call Magnus. We would say Brent is fairly valued at seventy to seventy five dollars this year. The downside risk is Omicron or another demand destruction. The upside risk would have to be things go very south with Iran or Libya at the same time even worse. So geopolitical risk is bullish macro risk is bearish. But the Goldilocks for this year anyway. I want to say this year is 70 75 in our view. So we would be selling rallies well into the 80s unless someone do something about Israel doing something to Iran et cetera. Now later years we're gonna have a massive bull cycle. But for this year we think we're going to build those stocks. It's a it's a balanced year and we just don't see the case yet for a hundred dollars. Hundred twenty dollars. And as we came into the office overnight and something that I haven't spent a great deal of time analyzing so I want your first take on the cosmic time. On the Kazakhstan president accepting the government's resignation. A state of emergency to January the 19th amidst these protests. Is there should I should I correlate anything to oil in any way from political dislocation in Kazakhstan. It is hugely important for oil man. It's hugely important. Remember the consensus says that governments will force their voters into either electric vehicles or efficient cars is going to crush oil demand this decade for for reasons of climate change and so forth. And yet when we look around the world and what my company does this very closely and we see instances of public blowback at higher energy prices more often than not the governments walk back those policies. France Mexico Brazil. And just in the last 24 hours the Kazakhstan government which has lifted caps on LP G Ream reread reimpose those put back in place the subsidies and now the government has resigned. The only country that really sticks with its increased energy cost policy we watch is Iran. They had the largest protests in 40 years a few years ago over a fuel price increases. They shot several hundred protesters. So I don't think that's the way the West is going to go. So there is a cautionary tale for the whole peak demand speedy transition story. And what we're seeing unfolding in Kazakhstan which we've seen all around the world but doesn't get a lot of attention. So very important for oil demand later this decade and transition policies. So that's on the on the broader way forward can I return back to to the near-term Bob. So normalization on supplies you're at 70 bucks. I'm Rita san. I'm going to put yourself in. I'm Rita virtually head to head. And Rita says 400000 barrels of an add. It's gonna be darn hard to actually deliver that because of supply constraints within OPEC. Who is most constrained. And what really Bob gets onto the market from the 400000 that they've promised us. Right. And I agree with them Rita. We're not going to get every one of those 40000 barrels a day. Russia's the producer that is most constrained. We'll be lucky if we can get 10 to 20 thousand barrels a day out of them in February. But Saudi Arabia UAE Iraq Kuwait we think they can go up and deliver about three in total three hundred and twenty thousand barrels a day. But you know as we get into May in the spring everyone's going to start to tap out. And then pretty much it's going to be more or less in Saudi Arabia and the UAE. So we are heading towards a vanishing spare production capacity. No question. We're about four point three million barrels a day total right now will be about half that level by the end of the year. But we're heading there slowly. I think some people are getting a little prematurely bullish. That's all it's coming. But I think we don't want to get ahead of ourselves.

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Rapidan's McNally on OPEC+ Increasing Output

Bob McNally, Rapidan Energy president/founder discusses OPEC+ hiking output. He speaks with Manus Cranny on "Bloomberg Daybreak: Middle East." (Source: Bloomberg)

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