"Either There Is An Agenda, Or There Is A Serious Problem In Their Models" With Dr. Anas Alhajji, Energy Outlook Advisors

For our COBT listeners and viewers, it's Maynard, Mike, and Arjun with a great discussion with Dr. Anas Al-Haji. Anas, it's so great of you to join us, particularly because you are... at ADIPEC, so there's no better place to have an oil-focused conversation than with our expert in the Mideast. If you don't know Dr. Al-Hajji, he's a renowned expert. in the oil markets, in macroeconomics, in global economics and all the issues affecting the oil markets.

And I think, Arjun, I'll jump ahead of you a little bit. We've been talking so much about the oil markets and the perceptions of them and the analysis of them and what's right and what's wrong. This just seems like a perfect time for us to get to visit with Dr. Al-Haji. So Anas, welcome and thank you for joining us. Thank you very much. It's really an honor to speak before you and your audience. Well, you're too kind, sir.

uh we're right in the middle of earning season so mike you might kick us off with uh the latest there's obviously a ton going on yeah i mean there is a ton going on and it seems like i don't have a minute to basically take my head out of transcripts

But anyways, you know, for this week, we're going to really kind of focus on a couple of things. You know, this is day 35 of the government shutdown. You know, this last weekend we had OPEC meeting and we're going to talk about some of those market implications and we're going to talk about some key energy.

third quarter themes that have come out so far. As far as the bond market, the 10-year bond yield continued to be stuck just north of 4%. Now, this is day 35 of the U.S. government shutdown, which is now tied to previous record and Trump's first presidency.

Today, we'll have elections across the country, so we'll see what happens. Also, given that now we're seeing some impacts from this current shutdown, including massive airport security delays, we can't imagine we'll be shut down much longer, but maybe I'm wrong. Now, as far as oil markets, WTI price is trying dearly to hold on to $60 a barrel. Hopefully our guest today will give us a little bit more upbeat forecast and outlook.

You know, as far as recent oil news, this past weekend, OPEC Plus raised their December oil production by another 137,000 barrels per day. That was totally consensus. but they also announced that they decided to pause all production increments in january february and march and i think that's a positive development

Now, as far as broader equity markets, the S&P 500 is down about a percent so far this week and may be finally losing some trading momentum after a huge run. And I guess the question is why? You know, what we've seen is like the last week, the big AI tech stocks reported Q3 results, which were generally in line with consensus. But CapEx, just like many expect it, is going up. But over the last week, these same AI and tech stocks are down.

On average, 3%, 4%, 5%, even Palantir today slid by 10% on growing valuation concerns and due to concerns with the sustainability of this AI rally. Bottom line, we've heard these valuation concerns. all the way higher so the real question is whether it's different this time we don't know we shall see but these tech stocks make up over 35 35 of the s p 500 market cap so if they sneeze markets could catch cold

Now, as far as energy themes so far during this Q3 reporting period, European U.S. oil majors reported last week. And for the most part, they're not leaning into these oil price levels. Aramco reported today and they sounded pretty constructive and highlighted they were raising their natural gas production capacity growth target by 2030 to 80% growth up from 60% growth.

From an EMP standpoint, gassy-levered EMPs have reported, with most of them constructive on the 2026 oil and gas macro, but they're not leaning in just yet. From an oily EMP standpoint, a handful of large... and mid-cap EMPs have reported. Most are taking a cautious approach to 2026 capital spending. Most have not given formal guidance, really soft guidance, and that soft guidance is really pointing towards

flattish oil production growth for 2026. Some other notable E&P news this week was the all stock merger between SM Energy and Civitas resources. We expect more M&A to occur over the next six months. across the entire energy platform. And we believe deals could look exceedingly smart a year from now when global oil fundamentals look much improved.

Now, from an oil services standpoint, the big news this past week was neighbor industries being notified by Saudi that neighbors resume operations beginning in March with two land rich were previously suspended. were previously suspended we're also hearing that more suspended land roads could be notified to resume operations bottom line neighbor stocks jumped substantially on this news and we suspect others like helmer campaign

will also be beneficiaries even when suspended land rigs are called back. With that, Mirren, we'll hand it back to you. Okay, great. Arjun, before we jump in with Dr. Al-Hajji, what would you tell us what's on your mind?

You know, Maynard, I might use this time just to give a brief intro of our speaker and how I know him and where I think we bonded and then maybe the opportunities for discussion. People say you can't meet nice people on social media, but that is how I actually know Dr. Anas from originally Twitter, now X, and he used to do some great spaces. And what I think I appreciated is a lot of what I try to bring to the table is.

Here's the consensus view. Here are the common discussion themes. And here are the issues with it. It's a classic thing in oil markets when oil is going up towards 100 or above. Everyone is bullish and they're fighting about the last $10 of who can have the highest oil forecast.

We're kind of at the opposite end of the spectrum now where people have some combination combination of either a bearish oil view or an absurdly over the top oil glut four million barrels a day of oversupply kind of view. And you hear. A lot of commentary from the macro agencies. People know the names, the IEA and others. It's not just the IEA. You hear from big oil chief economists.

And you hear from a lot of Wall Street banks. What I've appreciated about Dr. Anas and getting to know him, again, originally through Twitter and some of the spaces he did, is he brings a very differentiated view to that. And I have... As a fellow analyst, just a lot of respect for his ability to dig into these details and to not present the consensus narrative where oil is down $60 from its Russia-Ukraine peak.

when almost every Wall Street bank was debating over how big the super cycle was going to be. We will give ourselves some credit here, Maynard, that we resisted the super cycle language. We called it super volatility. And now we're at the opposite end of the spectrum here where people are trying to fight over this last five or ten dollars a barrel. Maybe it's even more than that.

but the question is when you dig through supply demand fundamentals when you dig through what really is demand today what is opec production what are the messages coming out of opec ministers and how do you interpret it I actually think Dr. Nas presents very unique perspectives on this. He can give his own background or you can as Maynard. He obviously does not come from the Wall Street kind of background that me, you and Mike all come from. And it's a refreshing and differentiated view.

of someone originally from the region. And I'm just going to turn it over to you Maynard to get this going. I think we have a terrific discussion. on the oil content here and i would encourage people to subscribe to uh what dr nas puts out in both written form on substack and then uh he has a twitter subscription as well yeah thank you very much this is really a badge of honor so thank you

Well, I'd echo that, Arjun, because we really met you, Anas, through your work. And we became consumers of it. Point out to our friends, they should read it.

Maybe I could start because of the four of us here on talking about the oil markets. I'm the least technical of you guys in terms of. watching all the things that you guys watch. And so what I'm struck by, maybe where we could start is the oil market forecasting and commentary. It just seems like it's like a lot of things. It's not in-depth. It's often influenced by pre-existing attitudes. Sometimes the work is coming out of institutions that...

For whatever reason, they're just pointed in a certain direction. Like a lot of long-range forecasting, it just has problems. What would you say, Anas, to get us going about the current state of the world's... uh oil outlook and the issues we're talking about and just and just kind of how accurate or inaccurate a lot of the public commentary seems to be right now one of the problems that can solve

many of those issues is for analysts and others to understand that the economics of natural resources is completely different from economics. It's completely different. from making chips for example and if we understand this this will solve many problems because the problem in the media is you have journalists who think okay i took econ 101 and that's that's enough for me

But the fact is, no. When you talk about the economics of natural resources, you end up with a completely different market. I'm going to give you some examples. When you talk about the oil market... Most of your cost basically is a fixed cost. When you go drill an oil well in the Permian, that costs you 8 to 12 million dollars.

That is gone. Whether you find oil or not, it doesn't matter. But the fact is, you end up with a situation where you find oil that your operating cost is so low relative to the total cost. Because your cost is sunk cost, that's it, it's gone. What that means is when oil prices decline, producers will continue to produce no matter what. Simply because they can...

cover their operating costs. And that's why Rockefeller came to the picture. That's why the Texas Railroad Commission came into the picture. Or that's why the Seven Sisters came into the picture. That's why OPEC exists. And that's why we need them all. We cannot say the same thing about manufactured goods. So when we talk about...

Any manufactured goods, basically, you can control that. But you cannot control that with natural resources unless you have some market manager to do that. So understanding that this is a natural resource. and comes with large sunk costs. And therefore, we have to understand it differently. And please allow me to just take one minute and then I will stop. If you go and look at the.

statements by the founders of OPEC in 1959 and 1960. What's really interesting about this is that they have two objectives. The first objective is to Stop depending on our revenues. They really want to get rid of that oil before even we heard about something called climate change. They wanted to get rid of that because.

they knew that dependence on this natural resource is not good in terms of economics, politics, etc. But the question was, okay, but now I need to move on and be a developed country. how I'm going to sell my resource and at what price. And they come up with the idea that I want to match. I need an organization that can be a market manager that can match.

supply to demand at all times. This is different from what we have in the market that OPEC is a cartel and they are trying to do this and they are trying to do this. Matching supply to demand is not cartelization. This is a completely different idea and different concept. And all they are doing basically is matching supply to demand. What that means is...

And to go back to Arjun's statement earlier, whether the price is 120 or 60, it doesn't matter in this case, because the best price for them when they match supply to demand is 60. and some time at other time it could be 120. So a decline from 120 to 60 basically is not like the way Bloomberg and others view it.

This is the best they can get. This is the best price they can get in the market. And therefore, there is no problem. It is really the media who has a problem with it. We are not seeing OPEC complaining about it.

So maybe one point of departure here. You are at ADAPEC. One of our new partners, Mark Castiglione, is also at ADAPEC. It's a huge gathering there in Abu Dhabi. to talk about the world's energy supply and demand etc what would you say is a this is a broad question but what would you say are the attitudes or the questions

or the sentiment, if you will, around where we are right now in oil and where we'll be over the next year or two? What are you picking up just from your meetings and from your discussions there? Now, the emphasis of this at a back basically is AI and energy. And we can go on and talk about the details of that.

There were certain statements being repeated, and we covered that in the Daily Energy Report yesterday. And these are kind of like catchphrases, but they are extremely important. For example, energy transition, but energy addition. No energy transition, but energy addition. This is really the sentiment here. What does that mean at this?

Oil demand or energy demand will increase substantially in the coming decades. And within that, oil demand will continue to rise. But with the increase in energy demand... Here is the problem. The climate change policies were designed for energy transition. What does the energy transition mean? That we are replacing something with something else.

So we are going to take solar and wind and biofuel, for example, and use it instead of coal and natural gas and oil to some extent. So that's what the energy transition is. But now. with this massive increase in demand. And today, basically, OPEC presented its long-term outlook here, and they are expecting oil demand to grow to 123 million barrels a day.

We are at seasonally at 107 for the average of the year is about 105. So they are expecting another 19, 20 million barrels increase in oil demand.

If we go back and look at the reasons why energy demand will continue to go up, you have first, you have urbanization. People all the time talk about population growth is not really population growth. It is urbanization. And one of the unique things about urbanization is that there is no way to go back.

So if you bring someone from the Amazon Forex, basically, and put them in an apartment in Rio and they experience electricity and all that stuff, even if they don't make any income, there is no way back. So that energy... consumption will continue no matter what. And based on OPEC forecast, basically they are expecting, listen to this number, 2 billion people to move to urban areas.

between now and 2050. Two billion people. So that's one driver. Another driver is immigration. People forget that when we talk about immigration, Why people are migrating in the first place? Because their life is miserable and they want to move to a better place. From low energy use to high energy use. And based on our calculation, if you recall...

When President Biden withdrew the troops from Afghanistan and they brought in tens of thousands of families to the United States, based on our calculation, the moment they landed in the United States and they're being put in houses and apartments. their energy consumption increased by 70-fold. 70-fold. Those immigrants at the southern border, the moment they come to the United States and they are housed in apartments.

their energy consumption increases by about 40-fold. Those immigrants coming from Africa to the EU, the same thing. And we are not talking about 10,000 or 20,000. Every year we are talking about millions of people. So energy consumption is rising. And the third one, before I get to AI, is increase in income.

And people, when we talk about increasing income, people misunderstand what it means. If my income doubles tomorrow, I'm not going to eat two lunches or eat two breakfasts because my income doubled. I'm not going to wear two jackets above each other just because my income doubled. But what people will do is they will spend, the first thing they will do is they will spend their money on comfort.

Whatever that comfort is. But the first item on comfort worldwide, and that we are seeing it, we've seen it, is air conditioning. And air conditioning is energy intensive. So we have those emerging economies. We have people who are moving to the middle class in millions in droves around the world, especially if you look at places like Turkey and India and Brazil, all air conditioning.

But now, of course, we are looking at AI and we are looking at data centers. And the missing variable is autonomous vehicles. That's what Elon Musk is talking about. Autonomous vehicles. are AI plus. So we are talking about massive increase in energy consumption. What does that mean is the implications are huge.

Climate change policies wanted to replace coal and gas with renewables. This is not going to happen. Because we can barely make it. Can I just ask you and Arjun and Michael. jump in here but it seems like so what you laid out um that makes a lot of sense the opec forecast given those variables that makes a lot of sense if you

If you pull up your average public oil and gas company, they trade at like four or five times cash flow. So some sort of value that you'd say, well, that's not particularly exciting. given that the world seems to be about to need so much additional supply. What do you make for the...

Does the world not really, is the debate about the long-term macro still so confusing that the world doesn't believe it and it doesn't show up in values? Or what do you think about if you're talking to an oil and gas company? That's a very optimistic scenario for them. But at the same time, I think most oil and gas companies feel like, well, I'm not a particularly appreciated part of this whole value chain here. Any thoughts on that?

Yes, this is exactly what I talked about earlier. This is natural resource economics, and we have to look at it from that point of view. So what happened is, if you look at the current situation, we do have... massive amount of oil that is stored in strategic petroleum reserves or inventories, and we do have spare capacity in some countries.

Yes, we have all those good views and the positive forecast for demand, but everyone is looking around and saying, look, I can satisfy that demand for the next two, three years, four years, whatever, using all this. oil that is either stored or not produced yet in the spare capacity. And that's where your question comes in that, yes, they are not going to be appreciated right now. But you eliminate...

some of the inventories, you eliminate the spare capacity and you can see what's going to happen. We've seen that in 2007 and 2008. So they will be appreciated one day. But again, it's natural resource economics, and we have to think about it in that way. The other related issue is when it comes to natural gas in particular, we reach the point here in the United States where we do supply it on demand.

That's not the case for oil, but it is the case for natural gas. We have so much natural gas and the ability to produce natural gas in a very short period of time is there. So if the demand for natural gas goes up. We produce it. And therefore, companies are going to continue saying, well, you know, everyone is benefiting from the supply chain of LNG and natural gas. And natural gas prices around the world are like $22, while the United States prices are only $3.

simply because, again, it's natural resource economics. Would you mind while we're here, and Mike, you're going to jump in here, but just since you hit on oil and storage, I know oil on the water. has been a big topic of discussion. It's something you've done a lot of work on. There's a lot of, there's some big numbers, there's some smaller numbers. Do you want to just tackle that issue while we're in this stories discussion?

I am very pleased basically to report today that I started this, what, three weeks ago, four weeks ago, saying that all those stories about... the massive increase in oil and water, the impact of that increase is high, and it's not really a big issue. And in the last two days, just yesterday and today, We've seen two things. First of all, we've seen big consulting houses repeating the same thing right now, but they are again about three weeks late. And we've seen the tracking companies.

retracting basically what they've been saying. So we have a major reduction right now relative to the earlier estimates. But let's go over this because I think it is really important for the audience. to know what's going on. We have exaggeration in terms of quantity on water, and we have exaggeration in the impact. In terms of the exaggeration of the quantity... I'll give you an example. We know historically that Iran was exporting its oil to China.

ships when they or the tankers when they leave iran basically they turn off their uh signals uh and they cannot be tracked so if you are bloomberg or waiters and you are only using your computers to track the shipments you will see only the smallest amount of it because only a few ships are turning the signals on and you don't see the others. You need other messages basically to track.

And that's why, if you look at the reporting historically, they always reported a lower number than reality for the exports of Iran. A few weeks ago, something happened, and we don't know until today why. All of a sudden, every single tanker carrying Iranian oil turned on its signal. We don't know what. And what happened is, all of a sudden, the screens basically are full of those...

ships and people thought, oh, I have increased in oil and water, but those ships are already there. They just turned on their signal. So that is an exaggeration in terms of the quantity. Can I just ask you, do you have a theory as to why those tankers would suddenly say, let's turn on our signals? I have no idea. We are still searching why, what's going on, what's happening. We don't know.

Okay. We know you know, and you're not telling us, Dr. Hawaj. I'm just teasing. The other issue now, the exaggeration on the impact. First, we have the sanctions, especially the sanctions on ports in China. We have to understand what China is standing for and what they are doing. China has two types of companies. They have the oil majors and they have the big companies that own the big ports, etc. All of those companies basically have connections with Western markets.

They deal with them. All companies operate in more than 25 to 30 countries. They use the foreign banks. They use the Western banks. They use the Western financial system. They are listed in the stock markets in Europe and the United States. So if they violate the sanctions, they will be in trouble. So the Chinese government realizes that. So they always instructed them, stay out of trouble.

obey by the sanctions. And obey by the sanctions means two things. Do not buy directly, let's say, from Iran. Do not buy directly from Russia. And the word directly here is extremely important. At the same time, they have the independent refiners and they have shell companies. The shell companies and the independent refiners have no connections with the West at all.

So what they will do is they will tell their oil majors, do not import Iranian oil directly, and then they will tell the others, go get it. And once it's China, basically, who knows what's going to happen and who's buying it. At the same time, we know that they send the tankers to areas between Malaysia and Indonesia, and then we have ship-to-ship transfer. And then once it arrives to China, it's...

Literally Malaysian oil. It's not an Iranian oil. So if you look at all the official documents in China, you are not going to see a single bottle being imported from Iran yet. On a daily basis, they import 1.3 million boroughs from Iran. So what happened is, when sanctions hit one of those big companies like a port, now they want to abide by the sanctions.

So all the tankers coming to that port now will be diverted to some unknown port somewhere. And because of that diversion, we have more oil and water. Literally. So more oil and water here does not mean we have an additional supply that we should worry about. It's exactly the opposite. The supply should be in the market and it's locked up. It's not even there.

The other issue that so we have the Iran issue on the quantity and then on the impact, we have the sanctions and then we have other issue related to the. OPEC plus and Saudi exports in particular. Saudi exports increased markedly in September. And Bloomberg and others basically went crazy over that. And look, this is going to flood the market and prices will decline. But if they look at the destination and where this oil is going, they will have a completely different picture.

Because most of the increase in Saudi exports went to Egypt and went to Egypt for storage, not for the Egyptian use, simply because the Saudis will send the oil. to a port called Anasukna, which is before the Swiss Canal. They will unload. And then there is a pipeline called Sumed Pipeline, which is the Suez Mediterranean Pipeline that goes west and then...

turn around Cairo and then goes north to near Alexandria port. This is called Sidi Krier. So the ships basically will unload in Ain al-Sukhna and then that oil will go into Sidi Krier via pipeline. CDCREER has a storage facility that is owned by Saudi Arabia and others. And just in August, the level of storage in CDCREER was almost...

near record low. So what the Saudis are doing basically are just replenishing their own storage just outside Saudi Arabia. And all of a sudden we have oil and water because they have to deliver that oil. to their storage and see the career. But eventually that oil will go to Europe, mostly to the EU. And if you look at EU storage, it was very low. So it's mostly going to replenish that.

What's interesting about this is that European storage, most of it is owned by Saudi Arabia. So the Saudis are just storing their own. It's not going to be in the market the same way they told us, Bloomberg and others, about it. And then the last point, I think, is the most important point. exports or which we call it supply, because that's what the supply to the market declined in September. So we have a decline in supply, but exports to China.

increased substantially. That is important because if exports declined, while exports to China increased substantially, That means some other places did not get the Brazilian oil. Who are they? The countries around Brazil, the United States, and Europe. Why this is important? Because the distance to China... Relative to U.S. ports, it's triple the distance. And relative to Europe, it's double the distance. And relative to the countries around Brazil, it's quadruple or five times.

So we ended up with more oil on water, but the actual supply is lower. And therefore, there was a lot of hype, whether you look at it in terms of quantity or you look at it in terms of impact. There was a lot of hype, and it's not a big deal. So if you look at the data right now as we speak, you see that storage in CDQR went up. It almost doubled.

Storage in the EU, basically where the Saudis have their own things, increased too. So basically that oil and water basically being sucked up into those storage facilities. And the ships coming from Brazil to China, they are still at sea until today. And there were Kepler basically, our friend Matt Smith at Kepler basically put a chart on Twitter. saying, look, there is another factor that Bloomberg and others basically are overlooking, which is the speed of ships declined.

And here I would like to bring another issue, because at the beginning I mentioned the impact of sanctions. What happened is, because the EU and the United States... imposed sanctions on so many tankers, the tankers that are available legally to the rest of the market is shrinking. And as a result, rates went up. And if I am an exporter and rates are up or I am an importer and paying for the shipments, I need to reduce my cost. And one way to reduce my cost is to use VLCCs.

instead of smaller ships. And VLCCs basically are used for long distances and therefore I end up with more oil and water anyway. So anyway you look at it, it was hot.

Yeah, Dr. Haji, thanks for joining us from ADIPEC. You know, Maynard, you know, he basically talked about the lead and we're following earnings. And this morning, you know, Saudi Aramco reported their earnings and, you know. The thing that came across to me in their transcript is that they're pretty constructive. I mean, every quarter, it seems like they get more and more confident of what they're saying in the future. Three things that came out in that call. First of all,

They're pretty constructive on the oil demand growth for the next couple years. Number two, AI is a big deal for them. Not only, you know, internally for efficiency gains. you know stuff of that nature and number three this quarter they really highlighted their natural gas growth they basically took gas a couple years ago they were talking about 50 growth to 2030.

then it became 60 today they went to 80 and they said 80 really without any incremental capital and the reason i you know use this lead and i think about where Saudi may have been thinking five and 10 years ago, and maybe what they're thinking five to 10 years in the future from the standpoint of they're using natural gas to displace oil, and they're going to be able to use that oil for downstream operations.

and other countries in their own country and able to export more. So maybe talk about where Saudi's mindset was five or 10 years ago. and maybe where it's going to be five to 10 years from now, just from an internal consumption standpoint and export standpoint, stuff of that nature. This is also related to Adapik, by the way, when we talk about AI and related to Adnok, who is the sponsor of Adapik.

Because the story of Aramco is almost similar to Adnok in this way. What we are seeing here is, of course, we are seeing a new vision, completely new vision in those countries. And the vision here for both companies... is to be transformed from a national oil company to a global energy company. And like Aramco right now is trading LNG, yet...

Aramco does not produce LNG, and Aramco does not import LNG. But again, this is part of the idea of being a global energy company. So we are looking at this transformation of those companies from national oil companies to... global energy companies. And for the Saudis, basically, that's really the major change. The major change is looking at it at just a company that produces oil to a global energy company that is involved in...

everything you can imagine. And that's the major change. But for the Saudis, basically the emphasis on being a leader in energy instead of being a leader in oil.

is really the main policy right now. And if you look at their renewable projects, for example, and it makes so much sense for them. In fact, renewables make more sense in Saudi Arabia than Europe, by the way. And I'm going to make two cases for that. The first one is without spending a penny on upstream, they can free up oil from consumption and export it by investing in renewable energy.

or in or nuclear literally so they are burning oil but most of their power generation comes from natural gas and what's going to happen is because of the increase in renewables on one side and the efficiency they gain because they have an efficiency program like the five the the star program in the united states

So there is a lot of saving on that part. They really can benefit from that replacement. Now, if you look at European countries, they don't have that replacement because if they have wind or solar, that's it. But Saudi Arabia, basically, if they have wind and solar, they have oil to sell. So that's number one. Number two, Saudi Arabia is a very large country and very diverse. And if you look at the map.

Historically speaking, oil is concentrated in the eastern province. So to bring oil to a power plant in northwest Saudi Arabia, imagine this. An oil tanker basically will leave Rasta Noura in the Gulf, go all around the Arab Peninsula, and then go up in the Red Sea to above Jeddah to Yemba, and then it will unload. And then you will have about 400 trucks that will load the shipments on the highway for 400 kilometers to reach the destination of that power plant. So imagine the cost.

Where those trucks go, the 400 trucks, that highway is called the highway of death because of the number of accidents. So now imagine building a renewable project, whether it's wind or solar. Instead of that, diesel or fuel oil or oil-based power plant there. Just by having a wind farm or having a solar farm there, the savings from the logistics... are huge. So they can benefit from that too. So there is a big case for renewables and nuclear in Saudi Arabia for those reasons.

You ask about the changes. That's where the change is. There is an addition to it when we talk about AI. Of course, Aramco was a leader in this because if you look at a reservoir simulation. I think they have the biggest model in the world, what, 20 years ago, before even other companies were aware of it. But one of the issues that we should pay attention to that... The emphasis on AI, when we talk about Arabic or you talk about the whole oil industry, the emphasis on robotics was old.

We are hearing about it now because everyone is talking about AI. But if you look at the past, what was the problem with the oil industry? The problem with the oil industry was it is because it is, again, natural resource economics. It is a cyclical industry. And it lays off engineers and people when oil prices are down and then hire them back or hire someone else when oil prices are back. And if I am a petroleum engineer or a geologist and I got laid off once or twice.

What the heck? I'm going to change my field and go somewhere else. And I will never advise my children to be in that field. So as a result of these fluctuations and the layoffs, and I think this is one of the problems with the culture of the oil industry, because of these layoffs and everything else, we have a problem with the human resources in the industry.

But there was a time when we have enough graduates basically for replacement. That is not the case now. So the companies about 10, 15 years ago, they realized that they need to go for robotics simply. because they have a serious problem. But now the problem is way bigger because while the oil industry, I'm being critical here, while the oil industry was creating nonprofit organizations to convince neighborhoods.

that you know oil is good and natural gas is good simply because they want to convince someone who is 70 years old to sign a contract so they can drill on his land okay the other side The climate change side, basically, were going to first graders, basically, and teaching them about climate change. 20 years later, they are in colleges. No one's going to go to petroleum engineering.

No one wants to go to geology. No one wants to go in that part at all. And all of a sudden, the oil industry is screaming. Look at the United States right now and look at the universities. Many universities closed down their petroleum engineering and geology completely. They don't exist anymore. We have only a few universities that still have that. And today, if you go to certain universities without naming names...

you go to their PhD programs or master's program, okay, you are not going to find a single American in those programs. All international students. So... The move right now by the industry toward robotics and AI is natural simply because of the problems we have with human resources. And what we are seeing in Atabek and other places right now with that, there is no AI without energy. So AI need the energy companies. On the other side, the energy companies need the AI.

simply because of the human resource problem they have. And of course, they need to improve efficiency and lower costs, increase production, etc. So there are other benefits.

And that is leading to a new breed of companies that we did not have before. And probably this is one of the highlights of the show today, that we are going to see some sort of new companies. that are made up of contributions from the energy companies and the IT companies. We've seen a contract being signed between Ednok and Microsoft two days ago, but this is a contract.

between the two companies i think we are going to see some subsidiaries kind of a joint ventures and this is going to be a new breed of companies as a result of that

It may be just one little more question before I hand it off to Arjun. One of the other themes in the market, especially as it relates to Saudi is, you know, they've been suspending land rigs, you know, for the last 12 months, I think anywhere from 75 to 80 rigs.

Yesterday, neighbors was basically got a... Basically, two of their rigs are now basically going to be going back... uh in operation next year and i guess the question is is obviously jeffur there was a lot of investment there land rigs were picked up there but now we're starting to see some tenders on the oil side maybe

Maybe give us your opinion of what this means. I mean, because in the last 12 months, people were like, okay, they're dropping all these rigs because they don't need the oil production. They have a bearish view of oil, you know, oil prices, et cetera, et cetera. Now they're starting to pick it up. Is that...

them having a bullish thought process and oil prices over the next 12, 18, 24 months, because I think you and I can both agree they're pretty forward looking, you know, from, from an OPEC country standpoint. Or are they saying there's declines in our country and we need to pick up these? How do you read the pickup of rigs here? And it could be anywhere from 20 to 30 rigs probably over the next six months that they basically that were suspended to go back in operation. How do you read it?

if or do you know one yes no one publicly knows how many rigs are operated under aramco no one And if you look at what Baker Hughes or the news and everything else, these are the low figures. The number of rigs operated by Aramco are way, way, way higher. But no one knows. And even if you ask them, they'll tell you, well, this is secret. We don't want to share it with you. So no one knows exactly what it is. So therefore, we don't really know what's going on.

But one thing is clear, and we have to pay attention to that. Remember that they were going for 13 million barrels of capacity. And then they decided to go back to 12. So everything declined. So if you see an increase right now, it happened because of that decline. So it does not mean much in a sense because of it. But when we talk about this 12 to 13, we have to be extremely careful because it does not mean that we are losing a million boroughs relative to what they said before. Here is why.

Because al-Jafura is going to add probably 300,000 to 500,000 barrels of liquids. And that's a gas program, not an oil program. So they are spending there. So why I have to spend additional money on the other side while I can't get 500 from it anyway? So that's number one. Number two, because of solar and wind and everything else.

They have inefficiencies on the other side. They have a reduction in oil consumption as a result in power plants. And therefore, they have three to five hundred thousand. they can add to exports without spending a penny. So all of a sudden, they have the million already supplied. So it does not mean that they reduce that so that is bullish for the market because that oil is already... will be there no matter what. And that was the logic why they don't want to go for 13.

Dr. Nas, I'd like to build upon some themes that you started off with, which I wholeheartedly agree with. One of the things I've pushed back hardest on was this peak oil demand narrative that a lot of people attributed to the IEA, and that's true. But frankly, you can see in a lot of the outlooks from a lot of the largest oil companies in terms of what they've published. So it's not just the IEA. It had become a consensus narrative that people are starting to push to the right.

I think it needs to get pushed way to the right, and I think you've already articulated some of the long-term points. I have two questions. The first is a short-term question. If we look at the IA's oil market report versus OPEC's equivalent monthly oil market report, In 2023, their global liquids demand was about the same, 102.2 million barrels a day. In 2024, OPEC was 0.6 million barrels a day higher than the IEA.

In 2025, it's 1.4 million barrels a day higher. And in 2026, OPEX estimates are 2.1 million barrels a day higher. So they have a higher absolute level of demand growing faster. We all know the IAEA will revise up their demand numbers. I think my question for you, sir, is how do you think about the absolute level of demand and its growth rates? How do you triangulate between kind of, quote, the OPEC numbers or your own numbers? Again, we know the IEA is too conservative, but the gap.

for 2026 is 2 million barrels a day. The IAEA is forecasting 4 million barrels a day of blood, of which half of it would get wiped away if you simply used OPEC's demand numbers, never mind some of the other factors you've also articulated in this call. How do you gain comfort? with different levels of oil demand between all these different projections? Yes. In our analysis, basically in our reports, we do avoid looking at the absolute numbers and make comparisons. So we avoid that completely.

it is better to focus on the rate of growth and compare the rate of growth than the absolute number, simply because their definitions are different. And that's why it is important to look at the growth. But please, for the audience, I mean, you touched on a very important point that the IEA is going to revise up their numbers anyway. So let me tell them exactly what's going on. In late 2022, the IEA told us that they are revising up their previous estimates of oil demand.

And previous estimates from when? From 2007. So they are revising up the data for 15 years. They've been underestimating the map. 15. years of underestimation. So that's until between 2007 and 2021. And then last May, they told us, whoops. We underestimated demand for 2022, 2023, 2024. So now we have 18 years of being wrong. And when you look at those last three years, the number is really staggering.

350 million boroughs adjustment. 350 million. Then in August, they said, whoops, we underestimated Mexico's oil demand. by a hundred thousand barrels a day since 2020. So you have 18 years of wrong information and underestimation. why I have to believe there are 700,000 growth right now versus others. So that's number one. Number two, if you look at the EIA forecast in 2015,

for oil demand in 2025, and we are already in 2025. Based on the IEA itself, the IEA number in 2025 is higher than their forecast. in 2015 by 3.2 million barrels a day. So you are talking about an organization basically being underestimating demand for 18 years in a row. with massive differences. And now they are telling me, well, demand is growing only by 700. So we have a serious problem there. Either there is an agenda.

or there is a serious problem in their own models, in this case. And when we look at this year right now as we speak, in fact, this was in the Daily Energy Report. that we are working on today. The IEA estimated that U.S. oil demand will grow by 60,000 barrels a day in 2025. Then recently they revised that up by 50%. So now they estimate the growth at 90,000 barrels a day. But if you look at the numbers, the actual numbers.

we have the monthly data for eight months. So if you compare the average eight months in 2025 to the average of eight months in 2024, The demand is higher by $175,000 a day, which is almost double what the IEA is talking about. But this average basically is really irrelevant. The best number to look at is the growth since December.

And the growth since December is like 280,000, while the IA is telling me only 90. So you can see where the underestimation is. And here, please allow me, I would like to mention something about the bearishness. Because, yes, U.S. oil production is increasing. But the media, whether intentionally or not, are missing the point on two fronts. If you look at the August data,

We've seen an increase, and yes, U.S. crude oil production is at record high in August. That's absolutely correct. But shale growth? there was no growth in shale. And why the media just ignored that? Why? What's going on? But this is really not important. What is important is if you, again, They are telling us there will be this massive supply, and we are going to have record supply in 2026 and 1.8 million barrels a day of access supply in the fourth quarter. What they missed is this.

The U.S. government is locking up oil in the strategic petroleum reserves. And if you count the amount of oil that is in the strategic petroleum reserves. since the 1st of January and you compare it for all the increases in production in the United States in crude oil since the 1st of January.

you will find out that the amount that is locked up is higher. And therefore, no one can use the argument that I am bearish because U.S. oil production continue to increase. It's already locked up. It's not there. I'm not talking about exactly physically the same oil. It's just the equivalent amount in this case. So when we talk about the bearishness, we have some really serious issues with the IEA forecast. But here I would like to go back.

Because people will say, well, who are you until you criticize the IEA and Goldman Sachs and others? You know, those guys are smart, too. And they are graduates of Ivy League universities, etc. all of them agree on the same thing. Well, we have something called circular information. I just mentioned to you that the IEA has been wrong on the demand estimate for 18 years.

And where do you think the banks get their historical information from? So if I don't update my data from the IEA as they updated, I still have the old data. And they are all basically been using the same data. So we have circular information here. And therefore, everyone is bearish simply because they have these things. The other thing is, and I would like.

Again, I know we are tight on time. I don't want to elaborate on this. But there is something I think psychologists and sociologists basically are talking about, which is something called conformity. For somehow the culture changed toward conformity and conformity in everything. For example, if you recall, I think we are all young enough to remember that.

There was a time when we were children. You can look a mile away at a car and you know the brand and you know what the model of the car is. You can give it the year and everything about it. Right now, we cannot tell. Because even in design, we have this conformity. Everyone is trying to conform. So if you look at fashion, you look at what people are dressing, what the houses are, the way they are built, we have this conformity.

And that conformity basically extends to forecasts. So I am a non-conformer when I express my views this way. That was a fascinating place as we... kind of move towards the end to just highlight because I think this is, you know, really the spirit of COVT and Veriton and Super Spiked is always about.

Just trying to understand the answers and trying to understand why people are getting the answers they're getting. Could I ask you one question while we're on it that I think our audience would find interesting? The SPR.

It was controversial in the previous administration that it was drawn down as much as it was to affect oil prices. What is the state of the SPR now? Like how much have we added? And do you have a forecast for how much it might grow to? Yes. So we do this every single week. We publish it in a report called US All Data. First, let me go back to what President Biden did. I taught energy economics for a very long time. And everything I taught...

about the Strategic Petroleum Reserves changed after what President Biden did. Literally, it changed the theory, it changed the impact, it changed everything. Ironically, I was the one who wrote a letter to the White House a long time ago during the Bush administration telling them to do exactly what Biden did. Criticizing the policy of releasing...

oil from the SPR at 30 million or 60 million. Because this is really peanuts and we have enough evidence to show that the impact is only a few cents and there is no impact of it. So the policy... The suggested policy that was more than 20 years ago was you release massive amount and the messaging with it is extremely important. Do not specify time and say, I will do whatever.

to take and i will release massive amount and and that will have bigger impact i am apolitical when i talk about these things what president biden did with the SPR was genius. I know many Republicans do not like it, and they made a lot of comments about draining the SPR. No, he did not drain the SPR. We still have... 350 million after he released 180 million barrels a day. But why it was genius? First of all, we realize now.

That the increase in prices in 2022 is not related to the Russian invasion of Ukraine. Now, the general story and the general conviction that it was the Russian invasion of Ukraine. that raised prices from 80 to 130, $50. Now you do the analysis and you can look back and see what happened. What happened is a copy of what happened in 2007 and 2008, where...

Demand was strong because of the recovery. And it outstripped supply by significant amount at the time when we have supply chain problems and we have all kinds of problems with supply. And OPEC... PLUS basically refused to cooperate simply because they thought it's a political decision. So no one realized at that time that this is a market fundamental thing. That demand was outstripping supply significantly.

And releasing the SPR proved this point, because where did that oil go? We did not lose the Russian oil. We did not lose it. So where did that SPR go? it went because we had this massive increase in demand because of the recovery after covid and lockdowns and that's where it went so it has a positive impact and if you look at you can discuss it say that the benefits to the world from releasing that SPR by lowering prices from 130 to 90. They're talking about $40 decline. Okay.

That $40 decline for the rest of the world, not only for the United States, not only for Americans. So the benefits, that's where the change in the way we used to teach that.

All of a sudden, we found out that there is a policy tool that is extremely effective and the benefits from it are just amazing. But you have to do it right. So they started filling the SPR. Right now, we did fill. about 65 million boroughs since they started filling it. And now the Trump administration basically is continuing the same thing. The Trump administration basically promised that they will fill it up to 700.

million like the bush did there is no sense of doing that and the reason why there is no sense of doing this because if you are exporting four million barrels a day about three million out of it is light sweet Why you need to store light sweet crude when you are exporting 3 million? Why you need to store light sweet when you are producing 9 million barrels a day of light sweet crude? There is no sense of that. At the same time...

you cannot mix the crude in the caverns. So the caverns that have light sweet, they cannot be refilled anyway. So there is no way they can do it. And even if the Trump administration decides to do it, it will take several years, probably seven to eight, nine years to fill it up. So by the time the Trump administration is over, basically years after that, until it's filled. So yes, we will see an increase.

gradual increase, a small increase. I don't think they will fill it up simply because of the technical reasons that I mentioned. But again, we learned a lesson from the release of the Biden administration. And I think that will go into history books. Well, you raise an interesting issue, at least from my seat, is as much as we talk about the SPR, we don't talk about the flavor of oil.

That is in the SPR and what we really need from a security perspective versus what's just storage. Absolutely. And that's why all the fill is medium sour. Well, I have to tell you, we've hit on so many of the key issues, but there's so many more. We've made it through this whole thing and we didn't even talk about sanctions on Russia and how we're going to bring the Ukraine.

Russia war to an end. Maybe I'll extract from you a promise. Come back because we need to continue this conversation, Dr. Al-Hajji. This has been fantastic. I will, but please allow me. I just want to make one statement. I think this is important because I was on a space earlier, the daily show, the daily finance show, and I mentioned that statement. I would like to mention it here. It's very important.

Most of the analysts that we hear about, basically about Russia and Iran and Venezuela, is really kind of a Western view based on Western values and Western learning and teaching, etc. And then we judge them based on that. And that is a big mistake. Because one of the things that people ignore is that the current Trump policies are instigating nationalism in those countries.

And when you instigate nationalism, the threshold for pain of the public increases. So what we hear from our friends is that, oh, look, we can just make them suffer and therefore. they will give up and then they withdraw. No, because when you instigate nationalism, the threshold for pain basically increases and therefore they are not going to leave. And that is...

On this question, because you're seemingly so right, but does that mean you shouldn't inflict this pain? Like what does that mean your policy should be? I think the Trump administration is obsessed with the idea of sanctions and tariffs. And this obsession is a serious problem. Now, you want to solve the problem with Ukraine and Russia. Think about it this way. The EU just imposed about 10 days ago the 19th round of sanctions. Just think about the number, 19th.

Why they imposed the 19th one? Because the 18th did not work. And why we keep repeating the same mistake over and over and over. So it is very clear.

and and if you look at i i every day on twitter basically i put a map of the oral screwed going through uh the map from kebler basically this is a life map the number of tankers basically going from the baltic all the way to india and i ask people to count them every single day and most of them basically are sanctioned tankers and imagine this they are sanctioned by the eu they go from the northern side of the eu

They go through the Danish Straits, which is an EU country. And then it goes from Western Europe, Portugal and Spain. That's EU. and then go through the Mediterranean, which is the south part of the EU. So it's in front of them all the time. And then they go through the Swiss Canal, the Red Sea, and they go to India. And those are sanctioned tankers.

And some of the tankers basically are going to the sanctioned refinery in India. So India basically does not care about the EU, literally does not care about the EU. We've seen those tankers every single day. And now Bloomberg is telling us, oh, they are going to reduce their imports from India because of the, sorry, from Russia because of the sanctions on Luke oil and Rosneft. Well, those sanctions have been there for a long time, and we did not see.

any reaction why they have to do it now and they missed a very important point here is that they said well this company is buying more from saudi arabia well Buying more because there is additional demand. This is an extra thing. They are not buying it as a replacement of the Russian crude. And that's a big issue that people are not paying attention to.

But there is no way that we are going to see a major reduction in Russian oil export. What do you think about the Russians' ability to continue to fund their production? Over time, like might might that be the way in which Russian barrels slow down? One issue is missing from this that what is the cost of producing oil to Russia? People do not realize this.

Most of the costs to the companies are taxes. It's not the cost of production. So the cost of taxes is more than the cost of production. So the cost of production is... let's say 22 dollars okay they pay 25 to 27 dollars just in taxes to the government so they can maintain that for a very long time and the irony here is and we've seen this several times

If the ruble goes down relative to all other currencies, because we've seen those people who are saying, look, their economy is crashing and the ruble is crashing. Well, this is good for the oil companies. Why? Because most of the costs of the oil companies are paid in local currencies, not in dollar, while they are selling their oil in oil price in US dollar.

So their cost basically goes down when the ruble goes down because most of their cost is a ruble. So if you were, this is so fascinating, I know we're way past time, but maybe just one last one. If tariffs won't do it, if sanctions won't do it, sanctions certainly don't do it if you don't even enforce them. But if you were trying and the Russians have so much ability to weather. financial stress as you were just pointing out, how would you put pressure on Russia to end the war in Ukraine?

I don't know because, I mean, this needs kind of a strategist or political analyst to answer that question. But one thing is clear that we are ending it with a policy. like this, that you have a problem and instead of solving the problem basically you try to cover the problem with something else and then that something else does not work so you need to cover it with something else and you keep building on it.

while you were supposed to go to the first issue and try to solve it. And that's where I think we need to figure out what's going on, because it seems that... We are just sending more arms and more arms and more arms. Okay, when this is going to stop? If the Russians continue, so are we going to continue forever doing this? And this is where I think the focus should be.

But again, the question needs someone in strategy and war games, basically, to tell us what to do. Well, Dr. Ahaji, this has been fantastic. Mike and I both and Arjun. We definitely want to talk about some more issues with you. You're in Dallas, so we should just come see you, or you should come see us. Anytime, anytime. Let's do more things together. We really enjoyed today's conversation, and I know it's not easy to join.

know later in the evening from from abu dhabi so thank you so much you're welcome you all have a great day thank you very much yes sir thank you thanks everybody