Pierre Andurand on What Europe Needs to Do This Winter

less all the time. Yeah, and I feel like we had some interesting conversations on this topic earlier in the year, definitely throughout the summer and even way back into the spring. And the difference now is that we really are starting to see governments take some steps to try to limit the impact of the energy crisis. Right. But here's the thing that I don't really get, Like, sure, the government can you know, cap prices theoretically, or they could provide

subsidies to homeowners theoretically, etcetera. But the one thing nothing actually provides more molecules, Like none of there's nothing that's on the government's balance sheet that it could be done to like actually, in my mind, get at the core issue, which is a shortage of natural gas, molecules or oil, etcetera. And so the question of like how Europe gets through the winter, how much of a recession will be, how it's gonna ration, energy, etcetera, is still, to my mind

like a huge question mark. And I think a lot might even depend on the weather. Yeah, that's exactly right, And there's so much to discuss on this topic. But I am happy to say that we really do have the perfect guest for today. We're going to be speaking

with the commodities trader Pierre onderand about this topic. We spoke to him, I think it was back in March or April of this year when a lot of these energy can sterns were just kicking off, And we're going to catch up with him and see what he's thinking about the market now. Can't wait. Pierre, Thank you so much for coming back on all blots. My pleasure. High Tracy,

Hi Joe, good to speak with you again. Pierre. Maybe just to begin with you know, we've spoken to some of our colleagues, some people in the energy market recently, back in August just about how dire the situation in Europe could get this winter. At least one of them was pretty pessimistic about the outlook. But you had a Twitter thread recently where you were suggesting that maybe things aren't that bad, Maybe there are steps that society as a whole could be taking to try to offset some

of these commodities pressures. What do you think Europe can do here? Yes, I think, I think, you know, then we think we have you know, we've been you know, used to living in in a very abundant world and we have to switch into a wolf of a dime. And once we understand that, I don't think the steps we have to make our are too difficult. But first, plan number one for no Russian gas, you know, pretty

much ever for the foreseeable future. Once politicians understand that we have to plan for no Russian gas, then it is much easier than you know, assuming that it will come and then it doesn't go. So so far there has been a lot of steps have been taken. So first, you know, at the moment, Russian gas exposed to Europe have gone down by seventy and I think they will

go down. I mean, for me, I think we have to assume that we will not get from now and pretty much from from next week onwards um and and think about how we can live without Russian gas altogether. So the good news is that Europe has been able to import a lot more energy so liquid natural gas than expected this year, pretty much almost double the imports of llenergy and that increasing energy so apply corresponds to about two thirds of the Russian losses so far, So

that's a good news. We managed to import a lot more energy, and there's more import capacities as being built and that will come online over the next few months. So it looks like energy import capacity will not be an issue for Europe. The problem is how much you know, llergy can Europe really managed to to attract because the West of the world is competing for that supply and

some other countries have no long term contracts. But I will assume that you know, Europe being you know what, you know, like one of the wealthiest continent, that they'll be able to most of the competitors for for llergy. And I think the hard part is mainly behind us. I think now the global supply of energy is still going up, we'll should have a big bump in. So if we assume that Europe could attract about of the energy additions, that will already go a long way in

solving solving the crisis. But we can't replace over the next two years all of the Ossian gas. We can replace a big part of it with energy, but not all of it, So we need to have some kind of demand response. Some of it already happened. So basically, if you think of all the gas, about fifty percent is coming from residential slash commercial demand as for hitting and cooking, but many hitting, about twenty five percent is

coming from industrial demand or so from power. So so far we've seen a switch of about thirty five oil in the industrial demand. So already today we have lost a lot of gas demand from the industry because natural gas prices are much higher than than oil prices. Some of that switching from gas to oil has happened, and I switching happening just because some of it needs a bit of lead time, so that in Europe and Asia.

So I think we will lose some natural guest demand worldwide due to very high natural gas prices, and then what's what's left to do is really bring residential demand and power demand down to Willie balance the market and the steps that have to be taken are not so dramatic. Basically a thing that I mean, it looks like in my supplant demand model that we need to bring the residential and commercial demand down by fifteen percent. Of responds to lowering the term stat by three degrees from twenty

two degrees celsius to nineteen degrees celsius. So it might sound a bit you know, chili relative to what we are being we are used to, but it's not very cold. It's basically had in nine six in in Europe and the UK, and we were living with fifteen to sixteen degrees in the seventies, you know, during the the energy

crisis of the seventies. Um so alreadys that will go along, and then we'll need to bring power demand down by five percent, which is you know, BIGI just switching some you know, switching off the lights in a room that are not used, switching off buildings at night when they're not used, and stuff like that bring power demand down by five percent. So there are steps to be taken. Um in that situation, we don't need any Russian gas at all. And actually Russia would not get one dred

billion dollars of European money as a result. So I think if I were bring that you know, to be three degrees cooler in in the winter, but still very comfortable, very comfortable temperatures, and you know, switching off some lights here and there and that enough to not gas at all. So I think we have more language than we think. I think the Shermong girls and the version protagonists, you know, when they say that we're all gonna freeze to days

in the in the winter, it's actually not true. But we need to plan, you know, I mean, it could be true at the end. If we don't make steps today to lower demand, then we will have some issue, some shortage before the end of the winter. I keep having to remind myself three degrees does it sound like that much? But you know, for listeners, bear in mind,

you know that celsius in fahrenheit and something. But it is interesting too that, as you point out, and you said on Twitter, that actually was more the average in the nineties. So it's not a huge backstab. Just on the question of getting adequate llergy imports. How much of it is it about essentially outbidding the rest of the world versus expanding the physical infrastructure to take in that llenergy.

Is there an acceleration of LLERGY import terminal construction that will start to move of the dial in the medium or short term, Yeah, there are some. So I'm not worried about the import capacity of Europe because we already have some floating platform that can import energy that are coming online in the next few months, and already today like the energy imports, we present seventy one of the import capacity of Europe. But we need a bit more important in the north of Europe, and that will happen

over the next few months. So it doesn't look like, you know, the import capacity is a constraint in Europe. So what we need is that we need the global supplier of energy to grow up. Um So, in terms to give you some numbers, global supply of energy is about five hundred and fifty busy m, so that's billion cubic meters, and it's growing for the next few years um at a one fifteen b c m yes of the next two years, and then it goes to sixty

or so sixty bc mp year. And so if we assume so basically with the current volume that Europe is important. It will just need to import about of the additions on top of the import today to balance the markets. Fas for the next two years we accept slightly cooler temperatures in the winter. So you mentioned this idea of Europe, you know, giving a hundred billion dollars of money to

Russia for its commodities exports. And one thing that you wrote after we last spoke in March was about how price caps on Russian oil could work and add pressure to the Russian economy, and you kind of focused on a problem in the current situation, which is that Russia is exporting less oil and gas, but it's selling that oil and gas at higher prices, so it's still getting a substantial amount of money from those exports. Uh. And fast forward to this month, we have the G seven

endorsing that price cap on Russian oil. I should say we're recording this UM on September twenty one, which is the week of the UN General Assembly, so there might be some news on this. But talk to us about what you would like to see from the G seven in order to make these price caps work, because it does seem like it's kind of a delicate balancing act, and presumably the West wants to pressure the Russian economy

without sending commodities prices way higher. Yes, so I think it's possible to enforce, but you need and I think a lot you know, all the consumers have an incentive in playing game and you know, buying buying really cheaper than what they've done, you know, in the past. So I think the keys to find cap prize that is lower than current prices obviously, and and lower than where China and India are buying it. And I think somehow there will be game, at least unofficially to to do that.

But then it's a question of how they will want to enforce it, right, it's um there will always be some cheating, But I think on on on a large part, it's possible to enforce as far as um you know, because there's like it's a large flow bicky. If you have to replace all the oil exports to Europe and move them to India and China, you need a lot more ships. So backy, you have some constraints in terms of shipping, and a lot of those ships are Greek, so I think there will be some you know, the

devil will be in the detail. I think it's possible, but the but hopefully they're speaking with enough people to understand what has to be done to really minimize the cheating so that we can really put a damp on on Russiana revenue. Can we just go back a little bit to the rationing, and some of the rationing seems straightforward in Europe, It's like, okay, turned down the thermostats in the winter, turn off lights in rooms when you're

not in them. But in terms of like industrial demand, that seems like, you know, it almost seems like a guarantee that there is a deep recession coming to Europe. If factories just can't afford to operate profitably at current prices, how much demand destruction, Like what's that going to do to Europe's industrial sector? And how much of a bite will that take out? How much will it just sort of like factory shutdowns essentially contribute to getting demand to

the necessary levels. So there's some industries that um use natural gas as if eat stuck, so not only to know not only geration, but that defeats stuck. So some examples would be chemical manufacturing would be you know, glassmaking would be petro chemical, the petro chemical industry. So for some processes you need natural gas as the feedstock and you cannot change it right, but some of them you can.

For example, for the petcam industry, you can use NAPSA instead of instead of natural gas, so you can have some switching from natural gas to oil. Also in in the in terms of natural gas demand for the industry, a lot of it is also to generate their own power and and for that they can actually use oil instead of natural gas. So you can have quite a lot of switching in the industry. And already today we're seeing switching of thirty pc from natural gas to oil.

So that's the good news. In in in the industry that does have to take natural gas, well, I guess we'll have to think of which ones are strategic and which ones are not. And the strategic industries will have to be helped by the government to be able to afford gas and power places until the matter resolve and and and it will you know, over the next two to three years. It would be resolved to more lergy and as far as we there's enough incentive for consumers

to red the unnecessary consumption of energy. I know this is a slight turn or detour, but can you give us a lot of perspective just from where your perspective what's going on with French nuclear well brickally, you know, it's a nuclear park. You know was at first at the life expectancy of forty years and we're getting towards the end of the forty years. So there's some issues that the maintenance have to be done. Uh you know they can they see some cousion, some you know, some

issue here and there that they have to fix. But it looks like you know, the work mainly at those power places. The work will be done for some of that capacity to come back online. But I think there should be a switch to to really invest massively into nuclear like around Europe, and I hope that will come because we need that baseload no no low calbum capacity. That takes a while to build plants, right nuclear plants, but they have to today decided to go for it.

If I can add also, you know, like the warmer temperatures in the summer make it more difficult to cool U nuclear reactors, so that's why some of them have to shut down as well. And that happens not only in Europe, but around the world, right, So there most of them are built around weathers or around the sea, and when the water becomes too warm, they have to shut down until the water gets cooler. That you have

that tissue as well. So you mentioned perhaps some support for certain industries who cannot easily substitute fuels, but you've also been publicly critical of some government support schemes for energy usage. Specifically, the UK is capping of electricity and net gas prices. I think it's something like two thousand

five pounds for UK households. What's the issue there? And I'm curious if that criticism also extends to the US where the big you know, effort that's been underway here when it comes to lowering energy prices is the release from the U S is strategic petroleum reserve natural gas in all Like, I think I understand that government you want to help households and businesses, and of course they should, you know, but we have to make sure that the

demand meat supply as well, because if demand is above supply, eventually you have shortages and we all are in trouble, right, we have blackouts, you know, we can't eat at all, and then you know in the winter gets much much

called the rights three degree impact. So the key is to do I think too if you look at the UK, UK places have a lot more expensive than most European places of emample in France, uh electricity and gas prices are only a four percent relative to last year, and next year there will be a fifteen percent, which is

way way below commercial like wholesale levels. In the UK they followed at least the doubles you know over the years, so that you should have some kind of price response already because it's a lot more expensive than last year and more expective than in Europe. But I think that the government should do more. You know, you can't. Just when I hear a listress saying, well, we don't want to tell you to use the less energy, well actually you do. You know energy doesn't You can't print energy,

right you? You can import some of it, but you have limits to how much you want to you can import. You can only import what's available on the world. Um and if you overbid I want, like if you try to buy you know, the one extra cargo that another country needs desperitely, then you you bring prices up a lot and then the government will have to to to pay the bill which is eventually which is at the

end of the day taxpayer, right. And so I think government should do more um to motivate, to encourage I mean, first to explain why to go on the public awareness campaign, to explain to the consumer what you know, how to reduce their energy demand while still you know, living comfortably um. And that's something that they've been they have started doing in the in in the EU, and I hope the UK will will will do that as well, because you

need to bring demand down. The market will not be able to two to be in balanced if you don't, let you know, consumer prices go up and your supply is going down, then you know, how can you meet You can't import enough energy to to really you can't replace natural gas with all the energy um. You need to bring demand down to And what about the spr release? How significant has that been in terms of bringing down

oil and gas prices? And then secondly is that a sustainable strategy because one of the criticisms as well, you really saw this inventory and then it becomes harder and perhaps more expensive to buy it back. Yes, I mean, so for this year, right, we have We still have the Russian invasion of Ukraine, but so far we have not lost any Russian oil or very little bitlically maybe maximum half a million bar of the day, which is a lot less than what we expected earlier in the year.

So so far Russia has been able to to you know, to export pretty much as much as they wanted around the world. But the EU embargo has not started yet, right, so we're starting in in could in early December and

then products in early February. Um so so far, but the better administration used that as the user potential you know, version supply loss that the next use to release THEESPR, and we had the largest SPR whillis ever m you know, briefly by hundred and sixty million barars I today over the last six months, which is weughly a million barrels a day from the US and also half a million

barrels a day from the west of the world. Publicly, if we lost half a million barllars a day from from Russia, but we got one point five million barllars a day extra from the ESPR, I think it means that the Russian invasion of Kin bought a million barllars

a day, more production, more supply on the market. And I think that one of the reasons why the market has gone down since the summer is the fact that market participants were expecting Russian supply to go down by buffy two million bars a day and we have not seen that yet. But on the other hand, we saw the SPR release, and there are like large worries about you know, uh, like important worries about a large recession coming with interest rates going up and with the impact

of the Russian war on the globody economy. Um. So I think it's a mix of that, right, Like, Russian supply hasn't gone down, we had a large SPR supply, demand is probably weaker than what we expected. And then you have all the macro worries about you know, fighting inflation for getting you know, higher and higher interest rates while the consortable is being hit with higher community places.

So when we talked to you in the spring, I mean there were a number of factors and you said, you know, there was a possibility that we could see two hundred dollar oils. I think the number that you put out and obviously now uh, you know, w T I think is somewhere maybe at the high eighties. Right now, where what do you see here? I mean the SPR release, They're not they can't keep releasing it forever, right, it's

a finite amount that they release. It's still seems plausible that we could have risks to Russian supply, and of course we haven't talked about. You know, China has had hard lockdowns over the last several months in major cities and that is significantly curtailed the country's petroleum consumption previous reasons. So I'm curious, like, which way you see the risk skewed and where could oil go now? Yes, I think res as cute to the upsite clearly as you say,

I believe we're gonna lose some Russian supply. I don't know how much, but I would say between one and two million pars a day. The SPR release will have to stop, I mean always. I think the pace of the release is going to slow down now, um quite a lot, and I don't think they can carry on for very long, so that will stop. Then China at

some point will we open. We don't know when, but they will, and there's probably two million packs a day of demand that can come back once China, you know, we opened to the world and you start having people going there and change people traveling again. So I think you have a lot of even risks that you know that are positive for the oil Twice, I would say the only negative events is is is a global re session,

but a large enough global re session blessing overall. The the risk in the medium terms more to the up side. But it looks like in the short term people are still very worried about, you know, with sessional risk, and the macroecon Michaut looks so so far it's trading like it's on the day to day basis if he wants

to go lower. But when I look at my supplanted demand balance for the next few years, to me, it looks bullish, right, and it looks and and it looks like prices we'll have to go up at least for now. I'm happy that is getting less money at least in

the meantime with lower old places. But I'm not sure it's really justified who has the upper hand between US shale and opaque at the moment, because you know, with prices going higher over the summer, we might have expected to see more of a response from US energy producers that didn't really seem to happen. They still seem to be kind of cautious about ramping up production. And meanwhile, we have seen some noises from OPEC about how they

would like the price to go higher from here. Well, the reality that we there is almost no spare production capacity arond the world. So most of the OPEC members at maximum production. If you look at the Southeast there at eleven million dollars a day production They've never had they've never managed to to have that level of production for more than a month, So now we're expecting them

to be at that level for years. Um, the US, shall it looks like, you know, US production is still going, but I think a lot less than in the past. So instead of growing like one to one point five million bars a day, I think they will grow around a half a million dollars today over the next couple of years. So it's still you know, a bullish outlook over wall. But then it depends if we have a total demand collapse due to too large financial crisis. That's

a big question mark. You know, something that you brought up on our last conversation that I haven't heard many people talk about, and I was sort of kicking myself for not having followed up on it. But you know, we talked about the economics of US shill producers and is the price signal strong enough for them to invest? But something you said that I haven't heard many other people talk about is available wells and is the is the oil there at the same level that it used

to be and is it or has it? Have we sort of picked the low hanging fruit? How much is that in your view and impediment and what do you see specifically on the sort of just like available supply part that may be contributing to a sort of less

the stellar supply response by domestic producers. Yeah, I think it's a mix of you know, the low hanging foods having been taken so they're going through less you know, polishing parts of the basin, and and also like supply you know, supply issues like supply like production part issues that they can't get from from you know, all the elements they need and all the fracking cruise to be able to grow production fast enough. So I think it's

a mix of those of those two. But I would say it's more of a question there's and and there's also the pressure from shareholders to not grow production too fast. Decline rate operations. The decline rates for SHELA like the first year, so they need to really keep on drilling to to keep productions still or to make it go up. As soon as they review the drilling, production can go

down pretty fast. So just on incentives for oil production, one thing that we have heard is, you know, the futures curve still isn't in the right sort of shape to incentivize future production. So I'm wondering how much you place on that argument. And then be you tweeted recently and this is something that we've heard from previous guests to this idea that the oil futures market is I think you said completely broken. And the fact that you could see a really volatile spot price, you know, big

moves for no reason or on very little news. How much economic information is currently embedded in the price, I

think you're white. I mean, like there are some days where I think the day I tweated that the markets were completely broken, the day where we went down ten dollars Barton from from like ninety five to like from one hundred and five to nine dollars in less than twenty four hours and there was no no headlines, and somebody comes and that he'd beat he'd bid, he'd bid for like twenty four hours and being down tend allars and and then we assume many days now nowadays is

normal to go down five dollars one with the and then back up three and and the volumes are much lower than in the past. The opening test has gone down a lot. Also in terms of positions. If you look at the commitment of traders, so data coming from from the CFTC, and you look at non commercial positions, it went from one point four billion barrels in two thousand and eighteen to three million today, So there's a

lot less people being long oil in general. Um. And then if you look at the phones that are a bit more active and look at their p n L day today, they will adjust their positions in line with the volatility. So if a market is twice as volatile, they're going to have half of the position in battles than they used to have. And so that leads to

a bit of a snowball effect. What you have less equality, less positioning, and but then every day you have still people trying to do something and you have some hedging that has to go through, which is the main the same type of volumes than in the past, but in the in the market that is a lot less liquid, and then it moves, it moves prices a lot. So I've been like very surprised by the price action over the last few months and and and worried about what

the price means. You know, if you can go down from hundred to nineteen one day for the reason, why not go down to fifty dollars in the day for the reason? You know, it's if nobody is willing to come and think it's it's cheap to buy it, nobody has any risk capetite anymore, then then the price doesn't

mean anything. And I'm afraid that you know, a producers, that's another issue to deal with, right on top of getting the financing, you know, having the white asset worrying about you know, you know, the shareholders and activists and all kinds of stuff, then they have to worry as well on the price of all that can move down or for no reason. I mean generally it's been down

more easily than I would say. What has it actually been like for you to trade energy and commodities over the past few months, Like what is it like on a day to day basis and how has it changed versus say a year ago. Well, you know, we've had like a structural British position on energy and that worked well in the first half of the of the year, and then we gave back some gains over the last

few months. So basically when it happened, we just reduce positions because you know, you don't you accept that I don't understand really what's going on the market. You know, I might disagree, but I don't understand. So I don't want to be too stubborn and I want to reduce my positions um to focus on survivable. So for me to period of time when I focus on survivable, I'm like, okay, well I don't really get it. I don't really agree with it, but you know, it is what it is.

I have to accept it. Let's reduce positions because I don't want to lose a lot more money than what we give back over the last few months. Already, I actually have another natural gas question, and you know, I'm just thinking like very long term, Like okay, we've been talking about this winter and how Europe will scrape by, but it's not often that we see a continent completely

re architectic essentially how it gets energy. And so of course the pipelines from Russia to continental western Europe were huge, or continental Europe. And now it looks like in the sort of aftermath or the sort of ongoing however long this goes, that there's gonna be this huge shift towards

demand towards US natural gas. And you mentioned that, Okay, maybe Europe itself is not particularly limited by import capacity, but we know that the US is limited by export capacity, and that domestic producers could sell all they wanted if if there was the if we had like more export terminals. Is this going to be a fundamental long term change to the energy story that ultimately benefits domestic US gas producers in a massive way for years to come. I

think so. I think it's very positive for for US, right, I mean, large part of what we're gonna lose from Russia going to Europe is going to be replaced by energy coming from from the US, from other countries as well, but a large part from the US, because I think US is probably going to be close to half of the the energy growth addish the energies additions over the next three to four years. So yeah, US will will benefit from it. And and and the fact that I

think energy policies in general will remain high. Um, there will still be you know a lot of money in moving cargoes until the US has export capacity, which I think is not to be for you know, six or twenty seven if if you even even I'm not sure that they will have excess capacities. And so if we're talking about a big redesign of the global energy market that's basically happening in real time, you know, more lerg coming out of the US, potentially more emphasis on renewables

or maybe even nuclear in Europe. How do you position for that? Well, I think you have to look like either in equities in the stocks that will benefit from that from that point, so I think it's quite positive for you know, all the natural gas producers that can export that have you know, also some export capacity. Um, I think that's the one that will benefit the most. And then uranium, like uranium, just being long uranium is probably a good trade. Being long the company that build

nuclear reactors will be a good one. And I think still solar solar and wind um will will benefit from me too. I think it's a yeah, it's nuclear and wind and naturally gas in the US. Do you see any short term or medium term tensions between essentially energy security and climate goals? And of course you know we know that coal production is up, as you mentioned in Europe factories switching to oil, which I believe is more

is worse for climate and CEO two emissions. Can you talk a little bit about like our is someone going to have to make a sort of like priorities sacrifice. You've talked about the industrial or the sort of economic sacrifice. But at some point to make this work, will there have to be a more explicit like acceptance like oh, maybe we push our net zero goals out a few years, or some sort of like rethinking of like the emphasis

on decarbonization. I mean, somehow if we recabinized earlier, we wouldn't be in that tissue, right we'll have we would you less natural gas, and Russia couldn't, you know, do

what they're doing. So I think the issue is not decambanization, is actually probably that we haven't done it fast enough yet, and this energy security issue will only I think should accelerate the transition, because when you deal with nuclear wind or power, you're you know, you're not giving that money to autocratic regimes and and so I think if anything,

that will accelerate the energy transition as it should. But in the short term, to keep the lights on, to make sure we don't have you know, social unrest, we have to accept that more code is being used and more all is being used. But you know, in the very short term, for like a couple of years, maybe

three years, um. But what they need to do is well focused on bringing more more generation capacity right from you know, nuclear from from wein from win and solar as much as possible, as fast as possible, because we cannot say, okay, well, you know what, we're going to stop having oil and cool and with nothing to replace it, because then then we'll really fuze to death and and and have social unrests. So you need society to keep on functioning. For that, we still need enough you know,

enough energy. Um. I think we can deal with ten or fifteen percent lessers enough fat in the system somewhere in consumption, but you can't really deal with fifty percent less right without having massive social arrests and huge, like a really huge financial crisis. So I think what we have to focus on is bringing more low carbon generation capacity as quickly as possible. And then naturally you will not use the coal and oil if you don't need it,

right that you then you have the choice. But when you can't say okay, you know, actually you don't use oil and don't use call if that is the only option you have. So just on this topic up in Europe, one of the other big trends that we've seen is nationalization of energy companies UM. You know, so things going on in France and in Germany. Just today when we're recording, there was this announcement that Germany is nationalizing its big

utilities company, Uniper UM. I think they're putting in something like eight billion euros worth of equity into the company. How significant is that for Europe's energy market? How does it change it? And then secondly, if governments are suddenly shareholders in energy companies or utilities, does that accelerate the shift to renewables or does it slow it down? I

think it will accelerate it. I mean, because it's an energy security issue, you need to uh and that's why, like early I became less polish on carbon, so on cabin price e the EU s carbon crediting you because I think now the month dates will come from the top down from government saying okay, you know what we need explicit extra and and and wind and and we're going to go for nuclear UM at some point we're gonna have those lines and governments will have to to

look at the long term and and and and and go quicker because we cannot stay um dependent on ATO CATECH regimes for too long. We know you know what that money can be used for. So you talked about the fact that to get through this winter right now, that Europe can do it in part simply by outbidding the rest of the world, which is good for Europe, I guess because it's Europe is incredibly rich and you can afford to outbid the rest of the world. But

it's basically a sort of zero something. Can you talk a little bit about where you see the most stress emerging, essentially from the countries that are on the losing side of these bidding wars. Well, it's uh just it's general to generally the countries that have the most issues to start with it, right, So small like emerging markets that and in imports of natural gas. So you sweet earlier this year with or the collapse of you know in

Sri Lanka. Pakistan you know is obviously having lots of issues to due to the floods and that are linked to the climate change. But also for all those countries, natural gas imports become a lot more expensive so that they become more energy poor. Um And generally that's that's

that's what will happen. But I don't think it's only a biding wor basically you have like it's a biding war in the short term the first like here also and then you have enough switching hopefully in the rest of the world from from gas to oil or other things.

Um yeah, generally gas to all is the cheapest actually because now oil is even cheaper than coal, and then that will support all demands to some extent that will be marginal the bulish oil, but it will displaces natural gas um demand, so bakly you'll have a bit less demand for natural gas. That will no open more energy cal goals to export to the country that needed. So

eventually you get a price. Do I do suspect the natural gas prices to stay high generally for the next two years so and then go down and stay elevated. But I think the first step down will be if we can manage this winter properly and and realize that actually in what we did it with no Russian gas already psychologically the price there will be a large price impact to natural gas. And and then all the switching and the extraal energy will we will get we care

and putting pressure on natural gas. I think it's really paramount that governments, you know, use those public awareness campaigns too to bring that demand that we don't absolutely need down, because not only we can avoid shortages, but also bring it will bring prices down significantly and and that will

be good for the global economy. And know, so you mentioned that you're you're still bullishly positioned when it comes to energy, I mean broadly, and maybe less bullish on carbon credits than you were at the beginning of the year. But what's the big wild card when it comes to the energy market at the moment, Like, what's the big thing that you are potentially on the lookout for that

could unsettle some of those positions. Is it simply Europe losing its appetite to you know, stomach some pain when it comes to reducing energy demand. I'm not too worried about that. I think Europe will, you know, like more aggressive Russia becomes the easierities to accept some pain on our side. And because we you know, all psychologically we understand it's a war power time and we need to take a heat as well. So I'm not too worried about that. So I would say there's two conflicting forces.

One is how much or we will lose from Russia, because we will lose some once the price cap goes through. We'll have to see how putting we act to it, to it if he cuts production and if he has how much, So we have to understand how much all we will lose from Russia. And the second is you know, the global economy in general, right if you look at the impact of higher interest rates around the world for

the consumer and businesses and countries. Um, we don't know yet what impact it will have for interest rates to have gone up so much over the left few months. For now you know these things, it's it's like paying that add up and eventually we have some kind of some kind of issue. Um, So I think the mix of much higher interest rates and still high energy prices and the worries about the war and and all that,

you know, makes people want to spend less. Um that could also have a negative impact on on on on demand and eventually on prices. So I think these are you know, it's not it's not that did to forecast because on one hand, you're gonna lose some supply, on the other hand, we're gonna lose some demand. UM. So yeah, it's it's not a musical overall with time you should go up, but it should go up, but in you know, clearly the market of being telling us that it's not

as as obvious. All right. I have two short questions. So the first one is on Russian oil exports, which you mentioned have not dropped off like they expected. Setting aside sanctions, one question that's come up is essentially whether Russia can import equipment to maintain its oil sector or whether Russia loses um uh sort of expertise and know how from the departure of foreign energy companies. Is that

still a risk out there for Russian supply. Setting aside the politics and price caps, that the quality of the Russian oil infrastructure degrades. I think it tweel and on top of that, I mean with mobilization that put in the once today, all that will have an impact I think on on on oil supply going forward. So so it will go down due to the sanctions or due to to put in one thing to to cut to to show that he doesn't think we with the price caps.

But also eventually with time production will go down anyway due to the lack of investment that will go into the system. And then my final question is how did you get that statu about what average temperatures in homes were in Europe in the nineties. How do you track that? And why have European homes gotten warmer over the last twenty years. I think it's generally energy has been you know,

relatively cheap, I will say for some time. I mean we have a period of time for a few years where it gets a bit expensive, but over over you know, twenty year period, even like almost thirty year period. If you look at consumption at the percentage of income has been going down in general, so energy has been relatively abundant and and and cheap, So you no, we we could live a more comfortable life basically, I think it's

due to that. And in terms of where where I got the start, some of them is just the idea. The idea showed that one degree, like moving the the terms sat down by one degree, has an impact of ten b c m for the for Europe, so that's about five percent or so, and so backy, you know, you just think it's kind of linear, says we degrees will be will be one and and then about knowing what the temperatures were in the past. It was actually

some medical medical journal. Actually it was the Indoor Beat on environ that's the magazine, and that's the study that was made into this than fourteen to look at the impact of winders on. I love that you're looking at those sources for these stats. All right, so slightly cooler winter or colder winter in Europe, but hopefully not a frozen one. Pierre on Duran from and Duran Capital, Thank you so much, appreciate you coming on. Thanks very much,

m Well, Joe. Always good having Pierre on the show, really good just to get an update of how he's thinking about the market at the moment. I do think this idea that the price disconnect from fundamentals or you know, maybe not completely disconnected from fundamentals, but the idea that it's so volatile right now, the moves are kind of unexpected.

There's lots of liquidity in the market, and that makes it hard or for everyone to deal with what's happening right And of course that was a point that Alex Turnbull made in our conversation a few months ago with Javier Blast Talking to Pure is great. I like that he provides a sort of non hysterical take, which are kind of rare these days because a lot of that I like, you know, it's like, how does he have

that stat about temperature in the nineties. Well, he's a there's a different reason why he's a massively successful hedge fund manager and most people aren't. It's like putting in uh the work like that and having like you know, putting in the effort to learn about these things, lots

of really interesting insights. And to your point about I'm glad you asked them, like what is it like been trading, because you know, it's one thing to look at a screen and price going up, but actually like how is the how is that price on the screen being arrived at? Is a really interesting question right or just got it directionally right? But then how do you actually execute on that idea? So energy markets are tight, but how do

you actually put that into practice? And are the prices that are flashing up on your screen actually reflecting what you think is going on in the market. Shall we leave it there? Let's leave it there. Okay. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway and I'm Joe wi isn't though. You could follow me on Twitter at the Stalwart, follow our guest Pierre on durand

at on Durand Pierre. Follow our producer Carmen Rodriguez at Carmen Armand, and check out all of our podcasts Bloomberg under the handle at podcasts. Thanks for listening.