 Hello and welcome back to the trading floor and welcome back. Here's current. I'm still alive. There's lots of questions as rumors on Twitter. There was rumors on threads. Wow. Wow. I mean, it was trending. Isn't it across the globe. Where is peers was trending. Now there's like that's the new Christmas stocking present. But where's where's peers, but where's Wally. Yeah, you know, it gets me back. Actually, I've missed this. Yeah. So fine. So there's a few people have messaged me, you know, you're a semi popular guy on the pod. So yeah, good to have you back on and good to pick your brains. And we certainly got to, well, I guess three things to talk about in this episode, mainly a catch up on the macro environment. And certainly with our now midweek podcast of Steven, where we can talk a little bit more about kind of company specific news and deals. We can definitely delve into the bigger, broader macro picture. And that is dominant at the moment, which is this whole perception of rates. And so we can dive into the US, the UK, things are ramping up quite a bit since we last spoke. So we'll look to deconstruct that situation. And then we're also going to talk a little bit about OPEC. Steven, I touched on it, but you've not been around for a while. So good to get your point of view as well. And that comes on the coattails of Saudi Arabia and Russia taking further preemptive action in all support prices and actually all sitting back at 72 at the moment, pretty much at the highs of the month. Yeah. Seven days in, I must say. But yeah, let's kick it off then. And yeah, let's talk a little bit about some of the US data out in the recent sessions. Yeah, well, I mean, yesterday's session, so Thursday, 6th of July. Well, actually, my surprise, some of you is officially the biggest stock market sell-off of the whole year. If you're looking specifically at the FTSE All World Index. So I mean, the FTSE All World Index, as the name suggests, it's an index that's made up of stocks from across the planet. So it's trying to give you that sort of bellwether overall gauge of sentiment and obviously through the stock market moves from across the world. And actually that index, yeah, dropped 1.7% yesterday, which made it the worst sell-off for the whole year. So I thought we'd dive into why, I mean, there's two points to really discuss that are definitely connected. So I think, well, first up Wednesday night, we had the Federal Reserve release their minutes from their previous meeting. You might remember their meeting was three weeks back and they did something different. They did not raise rates. And then what happens after these meetings is then three weeks later, we get the minutes from the kind of closed doors discussion. We get the minutes from those meetings. It just gives us more detail on what was going on behind those closed doors. And so the minutes landed on Wednesday night. And I guess the main takeaway from the minutes was that the Federal Reserve members were signaling that they may well look to raise interest rates again at their next meeting, which is at the end of July, right? And it was like, obviously all data dependent and looks like since their last meeting three weeks ago, well, what has the data shown? And the data has continued to show resilience. And when you then combine this, so just a reminder Wednesday night, the Fed will hike if data is strong, then on Thursday, well, what happened? Well, the US data got announced and it was not only strong, it was like, wow, this is super strong. And I'm specifically talking about, I would say three data points on Wednesday. One's called the job quits number. One's called the ADP employment report and then one's called the ISM services data, right? These are just economic measurements, what's happening out there in the US economy and how strong it is. And all of these data points, I mean, not only beat expectations, but it was like, all of them were like, whoa, that's a significant and very surprising beat. I don't know if we want to delve into these, but like the job quits rate. This is a great measure that people don't often kind of talk about. This is a great measure of the strength of the labor market. And it sounds a bit weird. You're saying, well, hang on, how many people are quitting their job? And actually, the more quits there are, the stronger that indicates the labor market is. Yeah, take a chance. Well, this is it. You might think initially that sounds a bit counterintuitive, but the point is that you're only going to quit your job. If A, you've got another one to go to, which is most likely. And here, normally, when people are changing jobs, they're kind of getting a salary hike, or maybe they're getting, I don't know, a tight promotion, you know, in terms of title or whatever it might be. So people tend to only quit when they're confident. They already got a job locked in, or they're confident they can get one. So that jobs rate jumped actually to the highest reading of the whole year. This is for the month of May. So the job quit rate data is kind of, it gets announced quite late on in the cycle, but nonetheless, it was the highest reading since December of last year. So it's like, wow, okay, this labor market, not only is it staying resilient, it's actually strengthening that. And this was kind of backed up very powerfully by the ADP employment reading. Now, this is for the month of June, and this is looking at the job creation rate in the private sector. And it came in at a quite sensational, 497,000 jobs created. We were only expecting 228. So there's more than double what was expected and highest reading for 18 months. So again, evidence that not only, we thought the labor market was staying resilient. This data suggests it's actually now starting to strengthen again. And then looking at the sector standpoint, leisure and hospitality is by far and away the largest contributing factor to new hires. So pretty healthy consumer, it would seem. And you can kind of temper this a little bit by saying that actually in the summer months, there is some seasonal factors here. So I think it has Goldman's that were pointing this out on the Thursday after the release and saying, look, just, yeah, this is super strong, but you normally get a bump up in the summer months, right? So the seasonal factors here. Yeah, and I've got the stat that Goldman's was spinning. They were talking about this distortion in seasonal factors contributing to the June strength. They said ADP employment growth had picked up in June in six of the last seven years and by 193,000 on average. Okay, well, just in that one sector, 193,000. Yeah, I think they're talking about the sector. Yeah. So this sector was 232,000. Okay. So it's on average. It is above average, but it's not that far away. Yeah, okay. So that kind of headline figure of 497,000 is perhaps, yeah, we should discount that a little bit because of that seasonal factor. But I mean, it's so massive a reading, if you discount it, it's still huge. So very much still feeds into that narrative of actually maybe the labor markets weirdly kind of just restrengthening here. Then the final piece of the jigsaw was this thing called the ISM services data, which is actually this and the one key thing about this data is what often considered a lead indicator. Those two points I've just mentioned, the sort of quit rate, well, that's May. So that's quite a long time ago now. The ADP employment, well, that's June. Obviously that's in the rear view mirror as well. But the ISM reading is actually a forward looking indicator. And this is based on, yeah, just I won't go into the details now, but it's just kind of measuring the strength of the services sectors, which make up the vast majority of the US economy. And that kind of jumps back to almost 54. So that was the highest reading since February. Okay, so, yeah, I guess, so hang on, let's step back. Remember that stock markets have their worst seller for the whole year, despite this super strong data. And so just to kind of remind listeners, we're in this counterintuitive moment in the cycle where the biggest concern for investors is interest rates and how high will interest rates go? Are the Fed going to hike more? If so, when and by how much? And so any data that gives us a better read on that future trajectory for rates, this data is super important and markets are really sensitive to it. And the irony is, of course, that the stronger the US economy appears from this data, then that actually feeds into the negative driver for stocks because the stronger the economy is, while the more the Fed are going to have to hike. And ultimately then the more the recession risk rises, this recession, this like phantom recession that just never seems to want to appear. But the idea is eventually if rates go even higher then maybe that recession will be deeper. And so that's why stocks freaked out a little bit on Thursday in the face of this super strong US data. That's such an important point because it is very counterintuitive. Things are going seemingly well and yet the probability of the Fed overshooting now is increasing. Yeah. And history obviously tells us that the Fed do overshoot with these things in terms of they generally start hiking too late. They stop hiking too late. Too late? Yeah, it's all just too late. Yeah, basically. But yeah, no, look, we've got payrolls is literally about to drop as we're speaking. Yeah. What's the forecast for that? So I'll bring that to you as it drops. OK. But yeah, maybe we could just have a quick pivot and then I can bring it in as the data comes and chew over it while we just kind of take this conversation across the pond. Yeah. Because it's pretty similar situation, albeit worse. Well, yeah, it's got some similarities. So in that interest rate expectations have just shot higher. I think it's for different reasons, though, in a way. So like over in the US, the economy is super strong. So the Fed are going to have to carry on hiking because the Fed are worried that inflation is going to stay higher now because the economy is stronger. OK, so it's very much a demand side driven outlook. The economic demands strong. So inflation is going to stay high. So we're going to have to hike. In the UK, there's a subtle difference. It's not so much the demand side, right? It's not so much that we think the economy is accelerating. So inflation is going to go back up. It's actually inflation just stayed much higher in the UK than it did in the US. When we look at inflation, we're very specifically most interested in core inflation. And in the UK, core inflation has shot up over the last few months. In the US, core inflation has been going sideways and a little bit lower. But in the UK, it's carried on its upward trajectory, not because the economy is super strong. It just seems to be, I don't know, we've been trapped in this narrative. Maybe it's because of the central bank. I don't know. But ultimately, if the central bank is saying, if the message is, look, we're going to carry on hiking because, look, inflation's staying high. Well, then that just feeds the narrative of, well, if you go down to the economic level, now a business level, well, look, inflation is really high still. Well, all right, let's just increase our prices again then. And so it kind of almost reinforces prices continuing to rise because the psyche is that, well, the Bank of England are telling us inflation is going to go up. So let's just carry on. Rising prices and so inflation carries on going up. So the Bank of England have got super hawkish. Yeah, there was, I guess the headline grabbing moment of the week was when the, what markets are pricing now for the peak of UK interest rates is now 6.5%. Rates are currently at 5%. So they're now predicting that it'll go up and peak at 6.5%, which by the way, if it were to be true and that the forecast for that is timed like spring of next year to reach that level. If that happens, that would be the highest level of interest rates in the UK this century. You'd have to go back to 1998 to find the last time. So I think it's for like subtly different reasons. And that's why I would say I'm more bearish on the UK economy than I would be on the US. Check you out being Mr. Sensationalist this century. You do realise it's 2023, right? Yeah, we're a quarter of the way through the century. It's fact. Look at you pumping your view. Yeah, no, it's interesting. Andrew Bailey, the Bank of England Governor, I think he said words that always rile up both politicians and consumers because he's basically saying, if we don't get inflation under control, it's going to keep going on. It's going to get worse and it's going to get really bad. And we're going to have to put up interest rates even more. Yeah. So suck it up. But I know you're not the biggest fan of Bailey. Well, what do you think? Because look, this is what he said this week, I'm quoting here. He said that we need to get inflation back to where it needs to be and then we can assess what level interest rates should be going forwards. I don't know what I'm doing. And then he said, I understand very much the difficulties that people face, because obviously raising rates means more pain for borrowers. And so that's anyone with a mortgage mostly, right? And he said, look, I understand the difficulties for people. But unfortunately, this is how we have to get inflation down. If we don't get inflation down, it gets worse. I actually think it's impossible to measure, but that type of rhetoric, how much is that contributing to inflation going up? When the Bank of England says we've got a big inflation problem, as I've already said, well, people just like, let's just try to sneak in a price rise then. And I think it just feeds into then this inflationary narrative. But it's obviously impossible to measure how much that's a contributor or not. But basically what he's saying is more pain, there's more pain coming because no pain, no gain. Basically, right? And we need pain to get inflation down. And then fine, that's the more sustainable path for the economy in the long term. What is it? Just remind me, what is the salary with all the trimmings that he's pulling every year? What? Yeah, well, I remember Carney, his predecessor, was on $600,000 a year. They'd probably got him a bit cheaper, but I would say I'd like to think they got him cheaper. But yeah, I'd probably say it's got to be half a mill, isn't it? So yeah, he's fine. He paid off his mortgage last year. And on that point of mortgages, British house prices according to Halifax this morning fell last month in annual terms. The fastest rate in 12 years also saw HSBC, one of Britain's biggest mortgage lenders yesterday, announcing that they're pulling all deals offered to new customers through brokers for the third time in a month. There's been quite a few. I've seen LinkedIn posts from chief economists and banks saying stuff. What do you think about the mortgage market and the threat that that carries? Well, I think that's the big threat to the economy. And I mean, mortgages have already, mortgage rates have already gone up very sharply. Now, if these forecasts are to be correct, they're going to carry on going up, right? And this is obviously if you own a house with a mortgage, this is easily your biggest monthly outgoing. And it's like doubled tripled over the last 12 months and is going to carry on going up. So ultimately it's going to be a killer for the ability for people to consume like disposable income is just getting hammered by the increased mortgage payment. So then it comes down to, well, from a housing market point of view, obviously this is an incredibly negative force because you're going to get less people being able to get a mortgage number one, because these banks are just turning people down because they're worried about default risk ultimately. And that obviously then dampens demand. And then you're going to get people holding off on buying, not because they're getting turned down for a mortgage, but actually it's just too expensive and they just want to play a call or just rent for a couple of years. Hopefully rates come back down, then I'll buy. So yeah, from a demand point of view, it's a killer. So, you know, you'd certainly expect that downturn in the housing price index to, I mean, you've got to, it's got to be one of the most easiest things to predict. Surely house prices stay soft and keep coming down as long as interest rates keep going up. Yeah, I mean, I had a look at the Halifax report this morning and yeah, we're down, we dropped 2.6% year on year in June. I was looking at what house price change was in June 2022. Right. Annually, what do you think? Well, annualized, they were probably up 10%. Yeah, 13. Right. Yeah, so look, like this decline in house prices we've seen, it's like we've just started to come off the top. You know, so there's, you know, house prices haven't collapsed here, but I guess the risk of them collapsing at some point in the future has gone up because of this rate expectation climbing. Just off the housing market for a sec, back onto the banks, because there was an interesting meeting yesterday. I haven't heard what the outcome was, but the financial conduct authority were getting the banks together to basically give them a bit of a bollocking, because obviously here, right, we're talking about the cost of borrowing going up because interest rates go up. But what should offset that, at least partially, is that those that save money, those that aren't borrowers, you should be earning more interest on your savings, right? But actually the banks are being incredibly slow to increase the interest rate on deposit accounts. You know, they're super fast to increase the rate on your mortgage, of course, like instantly, as soon as the Bank of England raised rates, our rates have gone up, but very much lagging on the saving account side. So the financial conduct authority got them together yesterday and said, look, you need to raise the rates on your deposit accounts to give you an idea that if you take the big four lenders, so the big four here in the UK, Lloyds, NatWest, Barclays, HSBC, they're the big high street banks, the range of their interest rate on their deposit accounts is the worst, the best of them is 1.75%. And the worst is 0.9%. So rates have gone up 5%. And yet the deposit, one of them's got their interest rate is 0.9%. It's actually quite frankly, it's disgusting. And these banks, I mean, no wonder the financial conduct authority is pulling them in and going, you need to do something about this. So that can offset the damage that high rates does to borrowers, but only partially because we're more in debt. There's more people in debt than there are from a mortgage point of view than those that are savers. So that's one thing. I'd say I'm more critical of the financial conduct authority. Why aren't they acting faster? The banks are only ever going to do what they've done. And particularly if all the peer group within that sector are doing the same, you're not going to be this force for good and put it up to whatever, 3%, 4%, that's just not going to happen unless you get pushed. Why aren't they on that? Well, the issue is of course that, well, these are publicly owned companies, right? I mean, ultimately the government can't force Lloyds to do anything. It's only market forces that drive change and if all the big four are going, well, let's not change. The interest rates on our deposit accounts, well, then what's the incentive? I mean, not for a second am I suggesting they're colluding. Let's keep rates down on our savings account. I mean, I'm not necessarily saying that. What's that wine bar they all go to? But yeah, I do think it should be getting more coverage in the press. These banks should be getting called out more in the press. But the problem is, it's hard to get open and bank account anywhere these days. So because banks are reluctant to take on more deposits. You know, we had the SVB saga. So it's a really difficult moment. But yeah, it's right that they should be putting pressure on them. But ultimately these banks, well, they're publicly owned. They can do what they want or they can do what they should be doing, what the shareholders say. What's in the best interest for the shareholders and that's profit margin. So let's keep those savings account interest rates down. What a wonderful world we live in. And with that point, non-farm payrolls has just dropped. And I was talking to our summer interns about this this morning. Everything that you said about the data, I was saying to them, forget your consensus estimate today for payrolls, which was 225. The market's going to be leaning as in the bar is so high now for this payroll number to deliver. It's almost like a given that you're going to see a price reversal because the bars so disproportionately high. Yeah. And this numbers come out. And actually it only missed estimates by about 16K, which isn't a lot as far as payroll goes, but it came in at 209,000. And yields have dumped, dollars dumped and equities are rallied momentarily at least on the back of it. So the initial knee jerk reaction is that price mechanism of how markets have discounted almost like what's expected is now really rock solid high jobs numbers. And a pretty average report has come out. Now the important thing, and as I was expressing to the interns this morning, there's a difference between knee jerk intraday reaction and then the subsequent moves that happen in the days period thereafter. Because in the end, market pricing probably isn't going to change as far as the Fed is still going to hike. The interest rates expectation we talked about still remain. It's just in the short-term pricing that the markets just got a little bit overextended was susceptible to a little price pop on anything less than spectacular. Well, we had a price pop, but look what's happened. Yeah, it's reversing. It's now like new lives for the session, basically. Yeah, the other headlines here. Unemployment rate 3.6%, that was in line. The average hourly earnings, 0.4%, which was 0.1 higher than expected. So that's an important element. Of course, the actual year-in-year figure was 4.4, but it was rated 4.2. So there's your problem. And then the other final figure of note was the two-month net revision was negative. So basically, you've had a weak headline. The net revisions were weak, but your average hourly earnings are up. Yeah, which is, I guess, the sort of inflationary side of the report. So yeah, quite mixed data there. The S&P popped about 10 points because the headline figure contradicted what I was saying about yesterday's data. Yesterday's data is super strong, and that headline figure was up. OK, it's slightly weaker than expected. So stocks jumped, but then, of course, that wage growth, those wage growth figures are strong. So that's why you've now seen a reversal. You'll probably see the S&P. I would probably say finish roughly unchanged today, because that's quite mixed that data. But I guess just going back to that whole US point, it's still that conundrum. It's amazing how expectations were so wrong. If you go back, I was just reading up on it, if you go back to the end of last year, then the consensus, if you go back to like, I don't know, yeah, let's just say the end of last year, the consensus was that the Fed would, the peak of Fed hikes would be about 3%, and we'd get a sort of soft landing. OK, and so we'd all, you know, the prediction was we would be in a recession now, and rates would have had to have peaked at 3%. Everyone thought in the last year. And here we are now. There's no one that could have predicted what actually has happened, because what actually has happened, not Fed, the rates haven't peaked at 3%, there are 5%, and the economy, not only is it not in a recession, it's, I don't know, it's just getting stronger. It's like the ultimate sort of economists conundrum. It's how could both of those things have happened? And so, but here we are, right? So now you look forward again, and you're thinking, well, hang on, I made a mess of that prediction last time. So the confidence in my next prediction, obviously, is much lower. But now you're thinking, right, well, the Fed are going to carry on hiking, and we're talking about the Bank of England at 6.5%. I mean, I think for the Fed, are we looking at 6%, are we looking at the sort of... Not quite, no. Not quite 6%, right? But we're obviously expecting the Fed to hike at their meeting at the end of July, and maybe another hike before the end of the year, right? And so you're thinking, well, what happens next then? Is the peak 5.5% and what about that recession? And is it going to come, or just magically is it going to disappear? Well, I'll just come back to one thing, which is the yield curve. We've often spoken about this, and this is just looking at the interest rate differential for loans, depending on how long the duration of the loan. And the normal order of events is that the longer you borrow money for, the higher the interest rate is. And so you normally have a yield curve that's going up, okay? A inverted curve where we've got an unusual situation where short-term interest rates are higher, the long-term interest rates. Now, the last 10 times that's happened, post-Second World War, the last 10 times that's happened, there's been a recession. It's generally considered as the number one recession indicator. It's predicted the last 10 with not one single false indicator. So it's considered like, well, it's just nailed on. If the curve inverts, we get a recession. So the curve inverted, and it has been inverted, but I was looking at a study that was done about those last 10 recessions and the timing from the first time the yield curve inverts, how long does it then take for the recession to start? And the average amount of time, well now I'll give you the average last, the shortest amount of time was actually the recession 1960 to 1961, and that took four months from curve inverting to recession starting. That was the shortest. The longest was the great financial crisis, 0809. There, it was 16 months from curve inversion to recession starting, 16 months. But if you take the average across all the 10 recessions, it's nine months. Interestingly, on October the 18th, 2023, sorry, apologies, July the 18th, 2023. On July the 18th, it'll be nine months. So we're kind of, we're right into the zone where it's now, this is the average length of time between curve inverting and recession, but don't get me wrong. We're not going to have a recession in 11 days time. It was like a trailer for a new Netflix episode. And so, look, this curve, I don't know, it's still inverted. It's the inversion's got deeper. So anybody looking at that is still going, like this recession is going to have to happen. It's just looking like it's going to be more towards the top end of that time range, maybe something like the early 60s, where it took 16 months to actually come through. And I guess the longer it doesn't happen, the more the Fed have to hike, I guess, which then means that it happens. It's not a massively convincing argument, but... With the variability of like the timing of the recession then, the use is knowing that for an investor, like a fund manager, because there could be four months, you're saying, it could be longer. So knowing that it's coming, I mean, surely you've got to be more agile than that, than trying to just pick a month and go for it. Well, normally, if you're thinking about the cycle and then trying to map that onto asset price cycles, well, then, you know, trying to pick the timing of moving from one cycle into the next is pretty key, because that's where you get the big shift. You get the rotation of assets, right? So if you move from, if you move into a recessionary cycle, oh, sorry, phase of the cycle, well, then here normally you'd get risk off. Normally you would get money coming out of equities, because in a recession, sales drop. So companies, they sell their stuff, and therefore their profits drop. So their share prices drop. So investors sell the shares because they don't want to lose money there. And they'll take that cash from selling the shares and they'll move it into safer assets that generate income, like bonds. So you tend to get this rotation of assets out of equities into bonds, right? So your timing of that move is key. It's about, well, when do I think the recession is going to start? And normally you'll get, it's actually before the recession phase of the cycle. It's what we call the late phase that you begin to see that happening as investors predicts the recession is going to happen, and then they come out of stocks. I guess 2022 in a way was that, where we were kind of predicting a recession. So 2022 was back. It's just that it hasn't come. And so what's happened this year is everyone's jumped back in to only a small selection of large cap tech stocks. And they've had a really rocketed, right? Because you've got people going, oh, we missed time this. Let's get back into these big tech. And so we're kind of in that now wait and see mode. Okay, we've got the recession timing wrong. Okay, what's our new prediction? And so, yeah, the timing is key. But at the moment, yeah, investors still going, what recession? Yeah, Morgan Stanley is still going, our top pick is Microsoft is going to go up 22% potential upside from current levels. Well, we do have earnings. What's going to be interesting is we got another earnings season that's about to start because quarter two is finished. So over the next few weeks, you're going to get another round of updates from companies. So that'll be interesting. The really most interesting of all will be Nvidia, but unfortunately they report slightly out of sync. So we won't get there until August. I think it is to see if that outrageous uptick in demand actually came through. That's okay. Well, when they disappoint and the shares dump 10, 15, then maybe I can pick up some by the dip. Well, let's let's quickly pivot and maybe we can keep it to five to 10 minutes on just the oil situation. So members Saudi Arabia and Russia. So the world's biggest oil exporters deepened all supply cuts. This was going back to beginning of the week on Monday. Prices have been trending pretty consistently higher. We have also had that data, of course, maybe a little bit on the demand side about this whole recession talk, we've been talking about the global macro level as well, may have been supportive. In terms of details, Saudi Arabia said it would extend its voluntary oil output cut to one million brows per day for another month to include August. Again, just to be clear, when you're trying to think of the strategy of OPEC, this is something that Stephen and I were talking about is like, well, okay, they're going to do a voluntary July cut. What next? The obvious move is, well, you extend it for one month. The obvious move beyond that is you then say a forward guidance seven will continue to review that and take action accordingly at extend beyond that month. And then lo and behold, they do so. So I guess the slight surprise for me this time round was they were kind of going solo before. And there's a lot of tension that's been brewing between the US, the powers to be in the oil market, the Americans, the Russians and the Saudis. But shortly after the Saudi announcement, Russia came out their deputy minister and said, Moscow is going to cut 500,000 as well in August, which I was quite surprised by actually. So they've obviously cut some kind of an agreement here because I think that sends an entirely different sounding to the market. Because if the Russians are in with the Saudis, now you've got some serious ability to influence supply. And if those two are going to get on and uniformly work together, that's different. And I think that underpins largely why all prices have actually gone up and stayed up for now, at least the cuts to give some context. Because I think it's always important. I think it's a bit abstract when I say a million or 500,000. It's kind of like, well, what is that? So the cuts amount to one and a half percent of global supply and bring the total pledged by OPEC Plus to 5.16 million brows per day. And to give you a bit more color on a top-level perspective, OPEC Plus accounts for about 40% of all of the world's crude oil. So that gives you an idea of the type of influence that they can have. And that's, you know, close to half the market, essentially. That being predominantly the Russians and the Saudis. So, yeah, that was the status of this week. But any of that catch your eye? Yeah, I mean, I was like, you know, I was definitely surprised that Russia came to the table here and agreed to cut themselves. There's always a slight difference. Well, no, sometimes there's a difference between what's going to happen to Russia. They will do, we're going to cut 500,000 a day. And then what actually happens, sometimes there's a bit of a gap there, but yeah, I'm surprised just because of course, Russia have got a war to pay for. So, but then if the price is going to drop, they're kind of in this cork between a rock and a hard place here because price has dropped. They're obviously taking less revenue from oil sales. So like that, it's almost like ironically, if you cut production, you'll actually, if you produce less, you'll actually earn more overall if that cut in production leads to the price going up. So that's the big change. So I think the Russia joining the Saudis here is definitely an important thing. But I don't know. Why is it going to work though, even with the Russians on board? Because I don't know. If I was trying to think about this earlier, I was trying to just step back a bit and go, well, hang on. Well, what of OPEC and now OPEC plus because the plus bit is Russia? What's happened? What's been their strategy over the last sort of 12 months? And they've been cutting production and cutting production. And normally the price should go up, right? But oh, hang on, it's gone down. Oh, God, OK. Well, we're going to have to cut production again. So actually now, as you said, is it five and a half million barrels now? Yeah, 5.16. Right. That's crazy, right? They're producing five over five million barrels per day less than like quarter four last year. And Saudi, to put it even more into context, they're now producing nine million barrels a day, which is actually the lowest amount they've produced in more than 10 years. So like their production levels are right down. So why is the price not going up? Well, I think there's two key things here. Number one, the US producers are loving this because their production is going up. So really, in a way, Saudi are just handing market share to the US producers. So that's number one. Production is going up in non-OPEC countries. I've got the numbers associated with that comment. So from the EIA, which is the Energy Information Administration, anyone who wants to geek out. Not to be confused with the IEA. Right. All the DOE, all the other weird and wonderful arms of measuring oil. But yeah, the Energy Information Administration, they project US crude oil production will climb 720,000 barrels per day to 12.61 million barrels per day this year. So they've up their forecast from 640,000 to now 720. Right. And it's going to hit 12.61. And you said the Saudis are down at nine now. Yeah. That's crazy. So that's number one argument, right? As to why prices aren't quite shooting higher, like the OPEC continue with light. The other thing is like, it's obviously on the demand side. And here I think there's two elements. The short term, which is the most important for what's going to happen with price this month and this year. So the short term stuff, well, obviously on the one hand, you could say there's a weak demand outlook in the short term because there's a recession risk. But this goes back to our previous conversation. Where's the recession? It just hasn't happened. But I guess we have seen China's economy underperform compared to expectations. We're expecting that reopening after their zero tolerance on COVID, that reopening to be a much more powerful jump in GDP and it hasn't happened. So that's been, so demand's been weak. So you can drop supply. But if demand's going down as well, it's kind of net, net nothing happens, right? But then I think the bigger arguments about long-term demand because what OPEC are trying to do is say, well, look, there has been a chronic lack of investment into long-term oil production. And what's going to happen is that fine, we've had COVID that's really disrupted the kind of normal scenario with demand. And what's going to happen when post COVID demand really does return, there is not going to be the supply there to meet it. And so long-term, the price is going to go well north. That's what OPEC say. Now your friends over at the IEA, they've actually got a little bit of a different spin on it now. They're actually saying that long-term demand, they think so between the years 2022 to 2028, that forecast period, they're actually now forecasting demand to be lower than they previously thought because of energy transition and how that's happening faster than people thought. So you kind of got these two counter arguments here. You've obviously got OPEC talking their own book. And then you've got the IEA saying, you know what? That energy transfer is happening faster. So it's fine that there's going to be less supply because there's going to be less demand. Who's right across? It's so interesting because there's two things that I heard that weren't from the US or anything to do with the US government. One is sources close to OPEC and the other is the CEO of Saudi Aramco. So you can tell where I'm going with this. So basically the sources close to OPEC said OPEC will likely maintain an upbeat view of their oil demand growth for next year. They're going to publish their first outlook later this month predicting the slowdown from this year, but still an above average increase in terms of demand. So another little tactical kind of bow to put into the arsenal of attempts to galvanize price. But then the CEOs, they owned or produced the Saudi Prime Minister said he was talking about Asia. And although we've just said and we have seen the likes of China are slowing, he was putting out the numbers saying that between 2019 and 2023, three million boughs per day of growth have been seen. India one million, one million boughs per day of growth. So China three, India one additional million. They're going to make up in demand through just the general uptick in those economies. And again, for context, I was thinking, okay, so what is three million uptick in China in that four year period? Is that a little or a lot? It's hard to know. Actually, I don't know these numbers by heart. And I had to look 16 million boughs per day is the consumption. So they've gone up and it's gone up by three million in three years or four years. And then India is the one. I was just reading a Goldman's piece actually this morning talking about India forecast to be the world's second largest economy. They're talking long term. Yeah. 2075. But they're talking now because of the population size 1.4 billion. And they were putting the key to realizing that potential for India is growing population is boosting participation within its labor force as well as providing training for skills for its immense pool of talent potentially. So yeah, they're talking up these kind of mega future economies and demand that they're going to fill that gap, I guess, that we're seeing in the demise of the Western world. Yeah, it's so hard to, well, of course, who knows what's going to happen. I mean, they're spinning different arguments to suit their own sort of their own book or all I can say for sure is that if you look at the NYMEX exchange. So this is in New York. This is a commodities exchange or NYMEX WTI crude oil futures trade. Okay, so WTI crude, that's the West Texas, Texas instrument. That's the stuff they pull out of the Gulf of Mexico. What I can tell you is the number of hedge fund contracts that are net long. So we often, when we think about pure, this is purely from a trader's point of view, right? So it's like, is the market bullish? Is it bearish? And one thing you could look at is the net long or net short positioning in the futures market, which kind of gives you a sense for what are people thinking about where price is going to go in the future. And if there's a net long position overall, more people are long and short or more, there's more, more people are long and short, then that's bullish. And on average people think the market's going to rise. Well, the net long positioning on NYMEX is actually, it's dropped. And it's actually, it's the lowest it's been in more than 10 years. It is still slightly marginally long, but the net long positioning is the lowest it's been for 10 years, despite Russia joining Saudi with these production cuts. Basically what I'm saying is hedge funds aren't, they're not buying it. They don't believe in that strategy working in terms of trying to push the price up in the near term. They don't believe that. Now they might be wrong, of course, but it's just another interesting insight into what people are thinking about now. Yeah, I wonder we like with Saudi still like sitting a good $8 offside, I guess their fiscal break even. I'd like to know the timeline of their kind of reserves and how long they can keep this going. I mean, obviously they had a little bumpy year in not too long ago. Yeah. I just wonder what point then from a timing perspective to understand geopolitical tensions, you could anticipate that now they're being proactive, but when does it become almost an existential threat? And they have to take action because their reserves are getting depleted. I mean, that's not going to happen tomorrow, obviously, but it'd be an interesting exercise to like plot that out over a long term. Absolutely. And just super short term, oil's just made a new low for the session. So it's actually now beginning to unwind some of that pop higher that we've had this week off the back of that OPEC news. So yeah. I think to conclude, you know, you're right in that initial assumption is that the market had that little blip and actually now all those moves are reversed. And I think oil has to follow suit with stocks and everything else. It's like the Fed are going to have to tighten and it's going to increase the probability of recession or more protected and faster slowdown. And therefore it was going to come down. Not what Saudi want to see, not what stock investors want to see. No. But it's the way a cookie crumbles. So with that, let's wrap it up. Good to have you back, Piers. And yeah, we'll catch you next week. Yep. Have a good weekend. Thanks, everyone.