Jeff Currie on the diesel pinch point, Hormuz, and equity "la la land" | EA Forum Ep.18

Added: 2026-05-22

[00:00:00]The war is continuing unfortunately, but good to have you back because I think we've spoken once. Yeah.

[00:00:05]>> Since the US Iran conflict broke out.

[00:00:08]>> Um I guess my first question has to be have you been surprised by two things?

[00:00:12]One, prices where they are today. Two, we've had this massive disconnect between physical even today traders are saying to me, guys, physical cargos are trading at premiums versus financial. Um yeah, where what do you make of all of this?

[00:00:27]>> I think I can explain what's going on.

[00:00:29]the oil market. What I can't explain is what's going on in the equity market.

[00:00:34]>> Yeah. Yeah. True. That was going to be the >> other one that I absolutely dumbfounded.

[00:00:40]And I I did this Bloomberg interview this week and compared it to Jaws when that scene where they go the beaches are open and all the kids running out there and you see the shark fin swimming around in the shoreline.

[00:00:52]>> Great analogy. Yeah.

[00:00:53]>> And and I think you look at the draws that we had, you know, two weeks ago, 25 million barrels. You and I have been doing this forever. If you got 25 million barrels in the middle of the shoulder months and then it came out and then everybody's, oh, the API showed another 25 million. Then the ones that came out, they were 11 million barrels.

[00:01:10]And they're, well, it's only 11 million barrels. And if that's it's just the level of I complacency.

[00:01:19]And so, you know, that that's the part I don't I just don't understand how people can just ignore the severity of what is coming. their direction. Um, but >> so, so you think for oil it's just a timing thing. Like we just haven't hit the >> Here's the way I think about oil is like there's a big difference between a deficit and a shortage. We're in a deficit. Demand is above supply. We are drawing inventories. And so you're borrowing oil from the future right now and you're going to do it until you hit tank minimum tank, you know, levels. And I they're all out debating the banks or where minimum levels. I don't care is it you know you know but all I know is distlate is in the US is 100 at 102.

[00:02:00]Yeah >> and you were 120 a few weeks ago. If you're 120 a week so you're 102 you're going to be out >> and right as you go into the summer driving season. And I I just don't see all this debate about where this is. I maybe these people think that you can draw the full 100 million barrels. By the way, even if you could draw the full 100 million barrels, you still would be out.

[00:02:21]>> Yeah. So, let me Okay, let's unpack a few things because I have a few things to say about this. First and foremost, yes, a lot of people actually think you can draw down tanks to zero. I've had people come up to me and said, "We have 8 billion barrels in stocks." I'm like, "You do know you can't go down to zero."

[00:02:38]Firstly, that 8 billion is like everything. So much of it 20% tank heels, infrastructure buildout, whatever.

[00:02:44]>> But I do think I was doing these numbers, we'll publish it um soon as well. Coming into the year we probably had a bigger surplus than you know we knew that the oil was there but we calculated just at the start of the conflict on the crude front the market probably had 375 million barrels to of excess right everything that we uh built last year like February as well we built so that just gives you to your point we are absolutely in a deficit but we are not in a shortage right so I think that's the difference and probably end May early June that inflection point is coming right So again to I I guess the question is we did rally and then we came off and that's why there's a sense of complacency to your point. People are like we somehow have solved it. Like why why do you think that's in the mind?

[00:03:32]Like that's the bit I struggle with.

[00:03:34]>> Here's I called up a bunch of my friends in Asia you know with because you know Trump's on and off. Notice that he always cuts a deal every single time the tenure hits 4.4%. Yes. It's the interest rates that scare him and crude drives the the break even and so if he can keep crude under control, he keeps the interest rates under control and that's the second biggest line item in the US budget. So clearly that's his motivation. Now, now I'd say these people in Asia I talked to, they all think that Trump runs the show, that the United States is in the driver's seat.

[00:04:07]And you and I both know that is absolutely. By the way, the point is actually it was around March when I realized, you know, this is the hopeless cause. As somebody put it to me, they go, "Have you ever looked at the other side?" I think I said this last time, the other side of the straight, you know, it looks like Afghanistan. There's caves in there. All you need is a guy with a rocket launcher and some drones sitting in there and it's a hopeless case. You can, you know, there's no way you're gonna force that thing open. Um, and which then leaves you with, you know, with the potential for a deal. But the US holds its ground on on, you know, the nuclear, you know, enri en enrichment of uranium. Um, and if I am if I am Iran, I want war repar reparations. They b they bombed us. And the other thing too that that I don't think is you talk to people in the US, they all go, "Oh yeah, um, US is winning the the social media war." And then if you talk to everybody outside the US, Iran's winning the social media war. And I'm not going to say it here. I have a seven-year-old daughter that goes to school here in London. The stuff she comes back and tells me that she's hearing on the school ground, you know, it's unbelievable. And I don't think Americans, in fact, I was with a group of Americans having dinner last night.

[00:05:17]They don't understand that. And I think that at the core is a complete un misunderstanding of the dynamics at play here. And I would say I don't think they they think that it's a it was never about missiles being thrown. It was all about once they close the straight. I one thing I found quite humorous that came out this morning was Trump goes, "My only goal is to open the straight."

[00:05:42]It was open two months ago. So is that your only goal now?

[00:05:47]>> Yeah. Because again to your point, the goalposts have had to move, right?

[00:05:50]>> Yeah, they've moved.

[00:05:51]>> But the point you're raising on Treasury is so important. We've seen that, right?

[00:05:57]The two things we know that really matter are the equity market. We'll come back to that because I've had clients say to me, "Oh, what's your most, you know, conviction trade?" And I always say there's a few in the oil side, but the real conviction is surely shouldn't you be buying puts on the S&P, right? I I joke about that, but it's the equity market and the 10-year.

[00:06:16]the 10.4 before you were saying 4.5 I've noticed >> suddenly there's peace talks and then it doesn't go anywhere right >> but let's play that out like what if it does go to 46 47 like what happens to the US like does he then get forced to do a deal because to your point and I just got back from the Middle East it was unbelievable how pessimistic the region is about when this reopens like this is not going to reopen anytime soon and it's not going to be a smooth reopening either >> yeah I and but also the with Trump is You take like, you know, all of the big um sovereign wealth funds in Qatar, UAE, and um Saudi, that's who's going to pay for that $700 billion of AI capback. So, and then you got the SpaceX IPO. You put all this stuff together, where's all the money going to come from this? Where's the money going to come from the the credit side? And I think that aspect, you know, is is is missing as well. But I don't think if I'm Iran, you know, all I know is I've been bombed three times in the last how many years. Um, you know, the the deals have not been struck in my favor. Um, I want war reparations.

[00:07:25]Yeah.

[00:07:26]>> I want I want to do tolls. I don't think this is going to be I you know, I've said from day one that I don't never thought this is going to be an easy process. And, you know, I like to look at, you know, the the Red Sea. We're we're sitting here two years. They bombed the hoodies who are a lot poorer than the Iranians and you've you're still down 75% of traffic in the Red Sea. And the only reason, you know, you have any cooperation right now with um oil flowing out of Yamu in in the Red Sea is because they're Chinese flagged vessels.

[00:07:56]>> Yeah.

[00:07:56]>> So I I don't I don't see how this thing changes substantially. Um it's gonna, you know, Yeah. I don't, you know, I don't want to get into the geopolitics, but you I I I if I am and if you look at what China did over the weekend with orders 834 and 835, they're going on they're going getting aggressive and they're going on the offense, not the defense.

[00:08:19]>> And so this is fascinating, right?

[00:08:21]Because Trump and Shia are meeting and >> maybe >> maybe maybe I think at what what 100 p.m. New York time tonight, we find out.

[00:08:30]>> We find out. Yeah, I think that's fair.

[00:08:31]Um the question is and you literally said this if I'm speaking with people in the US they absolutely think US is insulated from everything US is winning because to be fair US's exports are up massively right crude products chemicals everything >> by way another stat first time since 1943 the US was a net exporter of crude the week before last since 1943 that was basically when Brett and Woods was signed >> um so you know I at this point and They all think that they're they're long crude. They're not long crude. They're short crude. And they're exporting their SPR away, their commercial barrels away.

[00:09:11]If I you know, if I'm an American looking at this, so I built all this for strategic reasons and we're exporting it to the rest of the world because of a problem we've created out there.

[00:09:21]>> I think that's the challenge I face talking to I mean, look, when you're speaking with the majors, with the refiners, they completely get it. But when you're talking to the hedge funds, the macro guys, they're like, exactly like you said, we we exporting six million barrels per day. I was like, you do realize in two months time your own refiners will not have enough crude to run.

[00:09:40]>> Yes.

[00:09:40]>> Uh we think tank bottoms in the US Gulf Coast is, you know, 200 million barrels.

[00:09:47]If you get below 220, you're already in like pretty kind of tricky situation.

[00:09:52]We're not that far away.

[00:09:54]>> So, so I think that's the bit. That's why I'm struggling with it because everybody's like, "Oh, but we have enough to balance but somehow we keep drawing inventory." So, we are basically saying that we need to get to tank bottoms before this market actually wakes up and says, "Okay, there is an outright shortage."

[00:10:10]>> Yeah. Yeah. I think you have to get to the outright shortage and then may but but still it's like the banks are still oh 15 two weeks from now it's everything is going to be okay. And you got, you know, you know, like my old shop out there talking May 15th, June 15th, it's always two weeks. Everything, two more weeks, everything's going to be a-ok.

[00:10:27]Okay. No, it's not going to be a okay in two weeks. Even if it was, you know, as you and I were talking about the damage, the logistics and everything like that.

[00:10:34]Um, >> also just the pace at which this like reopens, no one knows.

[00:10:40]>> Yeah.

[00:10:40]>> And but why do you think because we have seen this in coming into this year, the US banks were extremely bearish.

[00:10:46]>> Mhm. They've not like they're a little bit bullish now like you're all shocked but not like saying guys this is a crisis.

[00:10:52]>> They they just mark to market >> right >> um and by the way it's almost like they're being censored. I don't want to go that far but it doesn't make or they either they're being censored or they have no concept of the magnitude of this. Like I was reading one of them we're drawing 14 million barrels per day. 14 million barrels per day draws in by Yeah. And then they go, okay, we're going to raise the forecast from 65 to 90, which is market to mark. I was checking the market at the time when they raised to 90. It was trading at 90 spot 51 at the time. That's a mark tomarket. And then, but the front is trading at like 110 115. And you're saying we're going to go to 90 and we're drawing 90 million or 14 million barrels per day. I I can't see where, you know, um, you know, where where where the the where the disconnect. Maybe it's just they they I think part of it is most of them, you know, I'm going to date myself, you know, I've been through enough cycles and this I think that their experience they look back abcake hey you know nothing ever happens we're okay this is going to be you know >> there's enough like everybody said Saudi is going to raise production to 12 million barrels per day it's going to be free for all the amount of people who have said this to me and I think you're exactly right I think upcake has reshaped how people >> think about you know geopolitical outages but the difference This is happening. It's happening as we speak, right? It's it's not that. Okay. Let's let's pivot back to equities because you started with that.

[00:12:18]>> I have heard this theory of late.

[00:12:20]>> I want to get your opinion on this. The >> energy intensity and oil intensity of GDP is going down.

[00:12:26]>> So what happens in hormones doesn't matter firstly.

[00:12:29]>> Secondly, uh hyperscalers their capex is going to go up to a trillion dollars next year.

[00:12:35]>> So we're a trillion.

[00:12:37]>> Yeah, we're a trillion dollars next year. So that's like a huge percentage of GDP. Why should we care about hormones? So everything comes back to like it's it's immaterial and that's why apparently the stock market can keep going up. But I guess okay well I won't tell you what my view is just just tell me on those two arguments like >> okay for for actually I'm just going to point something I learned this morning which was kind of shocking that 50 like almost 60% of the earnings of all that you know open AI investment were this other category. The other category is their equity positions and the other companies that they own. So the market goes up on gang buster earnings which is nothing other than equity res realization. So what happens when we go down anyway? I'm not going to get into that but I think let's go to the point about um you know the prices of of the you know of the commodities the um when you think about >> um or the oil versus GDP intensity. Yes, they're 100% right. Um, does helium matter to GDP? Does any of these commodities matter to GDP? Absolutely not. There's a big difference between price and quantity volume. And once you start taking this stuff out of out of the market, I even, you know, I wrote a piece on this recently making this point. I call it it's the rare earth metals of of of energy. We start pulling this stuff out of the economy. God, it is going to hurt. You know, we don't know. You know, you're going to have to ground plane shut down, you know, act.

[00:14:03]By the way, everybody asked me why did British Airways come out this morning and say that that you know they they don't care about it, but we'll see. But >> you know the um but I think that the the key point here is helium. Yeah. It doesn't matter to the GDP, but once you're out where you going to produce the chips, the chips start mattering.

[00:14:21]>> Exactly.

[00:14:21]>> Um you know, fertilizer.

[00:14:22]>> It's the derived products.

[00:14:25]>> Products. And I think that that's why >> um again, they're just going to have to feel it.

[00:14:30]>> Um and the question is when do they feel it? And I and you know if go back to like distillate you're going to feel it like any day.

[00:14:36]>> Yeah.

[00:14:37]>> Um you know if you're at 102 or whatever it is um >> it is going to go down very quickly.

[00:14:42]>> I I I don't do balances. I haven't done them in years but I remember 100 always being the magical number. And if we are at 102 and it's April when you we started out at 120 we're already at 102 and you should be going in before you get to the big you know the driving season for trucking and everything because we go into the summer months. um you've got a real big problem on your hands and I whe if it's and it's the middle distill it becomes sulfuric acid the list goes down. So >> um you know by the way it's all the commodities copper I like to point out almost all commodities are nothing other than dirt and diesel.

[00:15:17]>> So if you're out of diesel you got a problem.

[00:15:20]>> Yeah with mining with everything >> everything.

[00:15:23]>> What's the view on the hypers scale as a trillion dollars and that's why the horos doesn't matter. Oh god. The um and I think you know the point being there is they're spending they're spending as if there there's an infinite amount of AI compute.

[00:15:36]>> Yeah.

[00:15:37]>> What is the biggest in what is the biggest input into AI compute? It's called oil, energy, diesel, gas, I don't care, whatever you want. So if this is going up and where you going to get the infinite amount of demand because they don't even ever ask what the price of AI compute is? They assume it's zero. Zero.

[00:15:55]AI compute is gonna go to the moon. And and and also so many people I talk to make this point. They don't even know there's a commodity called AI compute.

[00:16:03]>> Yeah. You can look on your screen. It's called H100.

[00:16:07]>> Well, I think that that's the issue, right? Even if you can say fine, oil is not going to be needed. Gas. Look at prices. That's the same thing. What's demand destruction? I'm like, how are you going to have the hyperscalers delivering what they've promised without gas?

[00:16:18]>> Yes.

[00:16:18]>> It's the same same issue. But it is fascinating how we are in the minority and and you can see S&P is hitting an all-time high every single day. So there is no problem clearly, right? Like we we are talking about stuff because I've heard even people say, "Oh, you commodity guys make a bigger deal than it is, right?"

[00:16:36]>> But again, I keep going back to we we've lost like 9 million barrels per of crude flows, 12 million in production, another five in products, then you've got chemicals and helium, like you said, gas.

[00:16:49]Why are we Yeah, the the the sense that everything is fine is probably the most worrying thing that I have in in this market.

[00:16:56]>> Now, let's say this reopens at some point whenever it does, whatever that looks like. What's your take on the restocking like the infrastructure buildout because that's got to be >> Oh, it's this is this is that's what if you ask me what is mispriced in oil, it's longdated oil. The curve of shape is fine, everything like that. The back end is still at 70. Um >> the deckti was 77 bucks and I'm thinking what am I missing?

[00:17:20]>> Yes. And and that I think is where where we're going to see the repricing but like Exxon's down. All the producers are down because they started that ro you know that you know called the revenge of the old economy asset heavy asset light halo rotation. It started but now everybody's given up on the halo rotation and and gone back. I I'll tell you my absolute confidence. I have sold calls on the equity market, bought puts.

[00:17:44]I'm so long. Exxon, Shell, BP, um, oil, all you know, the miners, the I have the old economy, halo trade, you know, you know, completely, um, on and and levered to the hill. My confidence I am I feel like almost 99.99% they got it wrong. But and and I go, what could I have wrong here?

[00:18:05]>> But then I just look at I go back and I listen to the people. can't even tell a articulate a story as to why this thing should go to a trillion why or why you should have um you know buy these different you know tech stocks. So um I I'm really confident the question is can I remain liquid a long enough before it begins to to to deter but I do notice it just it it struggles to go much anything on the equity market struggles to go much higher than these levels. Um, so I think, you know, the point being is even if I actually think it could be more bullish if if if it reopened because then they're going to find out, oh god, producing oil is probably 100 plus. I don't know where it is. And the other thing too, you know, I've talked over and over about a macro repricing.

[00:18:49]>> And I do think it goes back to the simple observation. Every commodity is dirt plus diesel >> and whether it's grains, metals, or whatever it be. So if diesel explodes then the the underlying cost structure of all the other commodities that go into producing diesel explode and and also the other thing I've learned in watching this is is and I got this wrong. Um you know I been doing this forever but I mistake is I should have just owned oil in WTI. I tried to put on the the the equities the you you want to own the frontend oil and everybody own front oil. You reached your all-time high like two days ago because you're rolling that front. I know enough to know. By the way, it's funny. I told and you did too. All the clients way back in that previous super cycle, buy the front end of oil. And by the way, I had to have a friend of mine call me, Jeff, you're over complicating this. Buy the front end rolling front month. And by the way, it's worked like a charm.

[00:19:40]>> But the equities and so you want to own the commodity right now. And then once we get that and you start repricing long-term oils, that's when you buy the equities.

[00:19:49]>> And I did it the wrong order. Paid the price. And so even 30 years of experience, I still made the mistake.

[00:19:55]But I do think that that's the big repricing. So with oil, yeah, the front end could absolutely explode off of this, but I think the backwardation, it's it's not completely mispriced, but it's that 70, what is it, 77 or whatever on the back end, and I'd argue the Exxon shells, BPS, and the rest of them that they're going to repric. And then you think, okay, how do you get the cost inflation? Then you start rotating money. And also the real explosion here is right now they don't have to care about it. I mean, if you look at we when we were here, I think we almost had last time we had energy up close to 4% of the S&P. It's back to like two and change.

[00:20:31]>> And so what happens if they ignore it?

[00:20:34]So let's say it goes up by, you know, I think, you know, 30%. Do 3% of 30%. They don't care. Yeah.

[00:20:41]>> Now all of a sudden eventually it gets up to 5% of of the index. then they got a serious problem and then they'll be having to sell their Nvidia and the rest of them and reweight and because of most of it's passive they're going to be forced into these rotations. So it'll just start feeding on itself. So everybody goes, "Oh, you're crazy thinking oil could go to I don't want to say it cuz they'll whatever it's not stopping at like 50200 because then those companies will rerate. Everybody will rerate. Everybody's underweighted.

[00:21:13]then they're losing and getting killed on their on their on their equities or on the on their tech position and then they'll have to rewe on that. So the upside here when it starts to move the back end I think is going to be the real the real show.

[00:21:26]>> Yeah.

[00:21:26]>> And that's in a weird way like you said it almost needs to reopen because when it does that's when you realize how difficult it is. The storage bit every country is going to want to buy and hold.

[00:21:35]>> I think the GCC will come out and say we're going to build alternative routes and tanks. I mean that's just going to be massive. So, okay, since you started talking about it, tell us what's your top three pick.

[00:21:45]>> Um, I I have absolutely still loved Brent and WTI. I just I >> But back end or front end, you just think front end.

[00:21:52]>> I I think just stick with the rolling front month. And And it's like I look at people I don't know if you I'm talking technicals. They're candlesticks. You can see it in the market. Every time Trump comes out with his name, it goes down, pops up. The people who are just doing rolling front month and just sticking to that strategy don't even have the candlesticks because you're picking up what? Yeah. The roll is so huge. So I still love that trade and it's like and everybody goes you know oh what happens like my wife goes because I am over my ski tips and this stuff and she she goes you know what happens when they do the truth. I go I don't care I'll pick it up on the roll and you just keep picking it up. I think that's why we've seen that in our quant data lot of what we would call tourists but I think people are literally just buying they're in because of the backquidation and just rolling it.

[00:22:38]>> Yep.

[00:22:38]>> Yeah.

[00:22:38]>> And then I think the then the other one is I just want to own you know broader commodity indices just own the halo trade and actually I'm now a senior adviser at um at Carile and I'm going to be going back into into the investment product business of commodities on the liquid side. I'm still I'm still working with them doing um >> doing um private you know markets because you know but I think you know the opportunity in what we're talking I personally try to move in and do a halo trade and I know a lot of the people listening here have all tried to do halo trades it's close to impossible >> so you know I want to go out and create the halo products for people to invest in and you want to own the entire complex agriculture cotton the rest of it and I don't want to sit there and have to choose um you know so you know find some of you know the ETFs out there that actually um you know function you know that provide because the ones you and I were doing 20 years ago like BCOM GSCI um they're outdated and the problem is most of the products still are from that vintage um you know I'd say two two you know I'd focus on are um H A D and Hedger Her um those are you know actually there's two of my very close friends from Goldman who actually have career. They knew all the pitfalls in in um in um the um the traditional indices and by the way their outperformance has been substantial.

[00:24:08]>> Okay. Okay.

[00:24:09]>> Um so that you know that those would be ones that I'd be focused on. Um and then I you know I think the the other one is gold. I still want to be short gold here.

[00:24:19]>> And I think last time we talked about being short gold. It's worked medium.

[00:24:22]Yeah. But ultimately, when this thing gets really bad, um you're going to people are going to be dumping gold to pay for it. Now, you want to be long go.

[00:24:30]You want to be short gold until the central banks shift from being hawkish to doubbish.

[00:24:34]>> Yeah, of course.

[00:24:34]>> And then when they shift to being doubbish, um I'm going to be all in on gold. We're going to go to 10,000 or something ridiculous like that. Because the other thing, too, is >> what is the world of dolization? Um it's turbocharged now. I mean, what was orders 834 and 835 in China was basically saying if you obey US sanctions, you're in violation of Chinese law. It was an outright, you know, people go, "Oh, there's going to be a nice lovey fest with um with Trump in Beijing next week." No, there's not going to be a love fest there. You don't do that.

[00:25:05]>> We'll see what happens to later on today. But but that tells you that the dolorization story is is real. And you know, the the whole architecture that was put in place after Breton Woods is done. It's finished. And the whole deal was America is supposed to protect global sea lanes in exchange to use the dollar and oil was the most important commodity supposed to protect and the most important ship channel in the world was the Straits of Hormos and they closed it. They're closing it right now.

[00:25:32]So who's ever going to trust them again?

[00:25:34]>> Yeah.

[00:25:34]>> And so again, I want to own gold long term here because um ultimately it's going to be a I'm not going to give their name, but I I know somebody who's in the in the military business. So what's the world going to look like?

[00:25:46]China is China's not big enough to be the global hedgemen. US doesn't have the money to be the global hedgemen. So what is the world going to look like? Are we going to go back to the Dutch East India company, you know, with, you know, mercenaries sitting on their ships protecting their own um with drones and the world's trading in, you know, tokenized gold and silver.

[00:26:08]>> Is that is that where we're reversing to? I don't know. But I think, you know, >> those risks are there.

[00:26:13]>> There really are there. Um and I think you know the the realces are happening you know whether it's the Middle East, Asia, all over the world.

[00:26:21]>> So >> so uh long brand long halo trade and short gold. Yep.

[00:26:26]>> And equity markets not shorting it yet.

[00:26:29]>> I'm I am I'm sell calls buy puts.

[00:26:31]>> Sell calls.

[00:26:32]>> By the way, actually the the best trade I think out there I've been looking at it is just buy the ball the VIX on.

[00:26:37]That's probably the best way to trade it.

[00:26:39]>> Yeah, that's true. Well, thank you Jeff as always. Yeah, it was great. And I think there's a lot of lot of really good trade ideas in there. Great. Thanks for joining.