MacroVoices #412 Dr. Anas Alhajji: 2024 Petroleum Outlook Update

Episode Summary

Executive Summary: Macro Voices episode 412 centers on Dr. Anas Al-Haji’s 2024 crude outlook: absent major geopolitical escalation, oil is likely range-bound in the $70s–low $80s, but the Red Sea/Suez disruption raises shipping costs, tightens logistics, and creates meaningful political risk—especially for Egypt. Longer term, he sees a late-2020s energy crunch as underinvestment, ESG, and policy failures collide with stronger-than-expected demand, especially from China’s petrochemicals and EV supply chains.

Main Topics: Red Sea disruption and Egyptian risk (Priority: 5/5): Al-Haji argues the Yemen/Houthi conflict matters less than the broader rerouting of global oil, LNG, and trade through the Red Sea and Suez. The biggest systemic risk is Egypt’s economic stress and the possibility of instability that could affect canal traffic. 2024 crude oil outlook: range-bound unless geopolitics escalate (Priority: 5/5): His base case is flat-to-moderately range-bound crude prices in 2024, with Brent mainly in the $70s to low $80s. He rejects forecasts for $100+ oil unless supply is directly disrupted by a major geopolitical event. Supply/demand balance and the role of inventories (Priority: 4/5): He says 2023 was a year of failed forecasts and inventory builds, while 2024 looks like a slower-growth year with less recovery-driven demand. OPEC cuts and political risk are supportive, but demand remains too soft for a sustained breakout. China’s petrochemicals and EVs may increase oil demand (Priority: 5/5): Al-Haji highlights a less appreciated channel: China’s EV boom and petrochemical expansion may raise naphtha/LPG demand enough that EV manufacturing can consume more oil-derived feedstocks than it displaces in gasoline demand. Longer-term late-2020s energy crisis (Priority: 4/5): He agrees a structural energy shortfall is likely later in the decade because investment decisions from 2014–2017 are already fading, while underinvestment and policy reversal away from green commitments will eventually tighten supply. Market and technical backdrop across oil, equities, FX, gold, uranium (Priority: 3/5): The post-game covered crude inventory draws and stronger time spreads, plus equity breadth deterioration under a narrow Mag 7 rally, a softening but range-bound dollar, constructive gold consolidation, and a still-intact uranium bull trend.

Key Arguments: The Red Sea is now a global energy chokepoint because it carries far more oil, LNG, and trade than before; rerouting has increased shipping costs, insurance, and fuel burn, but has not justified extreme oil price forecasts. The main macro risk is Egypt: Suez Canal revenue loss, currency collapse, IMF pressure, and surrounding regional wars raise the odds of instability more than the Houthi threat itself. 2024 should not resemble a supply shock year; with slack demand and inventories already built, Brent is more likely to trade in the $70–$80 range unless a conflict destroys capacity. The 2023 demand surge was largely recovery from lockdowns, not organic growth; as recovery fades, total demand growth should normalize and appear weaker. Marketable spare capacity matters more than headline spare capacity; some reported capacity is heavy crude the market does not want, reducing the true cushion. China’s EV boom may not reduce oil demand as much as assumed because manufacturing batteries, bodies, interiors, and petrochemicals consumes large amounts of naphtha and LPG. The late-2020s crunch is plausible because the investment slump from COVID-era underinvestment will show up with a lag in 2025–2026, compounded by ESG and policy reversals that make supply growth harder. A major oil spike would eventually destroy demand too; if prices hit $120–$130, demand could fall by 1–2 million barrels per day quickly.

Data Points: Macro Voices episode: 412 - Episode identifier and production date referenced at the start Production date: January 25, 2024 - Episode production date SP 500 March futures: up 266 bps to 4,898 - Weekly macro scoreboard U.S. dollar index: 103.25, down 12 bps - Weekly macro scoreboard March WTI crude: 75.09, up 349 bps - Weekly macro scoreboard March RBOB gasoline: 224, up 370 bps - Weekly macro scoreboard February gold: 2016, up 50 bps - Weekly macro scoreboard Copper: 389, up 429 bps - Weekly macro scoreboard Uranium: 103.90, down 175 bps - Weekly macro scoreboard U.S. 10-year Treasury yield: 4.18% - Weekly macro scoreboard Red Sea rerouted oil flow: from ~250,000 bpd to 1.7 million bpd - Al-Haji’s explanation of post-Ukraine shipping changes Traffic diverted/stopped in Red Sea: 70%–75% - Al-Haji’s estimate of current disruption Bab el-Mandeb flow: 5–6 million bpd - Oil volumes passing the strait Egyptian pound: from 15 per USD last year to 65–70 per USD black market - Al-Haji’s warning about Egypt’s economic stress European gas dependence on Russia: 17% of total gas imports, potentially rising to 20% - Impact of LNG rerouting away from the Red Sea 2023 world oil demand increase in Q3: 3.7 million bpd - IEA figure cited by Al-Haji 2023 world oil demand increase in Q4: 1.6 million bpd - IEA figure cited by Al-Haji U.S. crude inventory draw: 9.2 million barrels - Post-game EIA inventory summary Cushing crude draw: 2.0 million barrels - Post-game EIA inventory summary Gasoline build: 4.9 million barrels - Post-game EIA inventory summary Distillates draw: 1.4 million barrels - Post-game EIA inventory summary Net petroleum products draw: 5.7 million barrels - Post-game EIA inventory summary U.S. production (weather-hit): 12.3 million bpd - Post-game EIA inventory summary Normal U.S. production reference: 13.3 million bpd - Post-game explanation of weather-related shutdowns Potential extra bunker demand from rerouting: 200,000 to 350,000 bpd - Al-Haji’s estimate of additional oil demand Potential extra bunker demand in full blockage: up to 700,000 bpd - Al-Haji’s estimate of additional oil demand China EV sales in 2023: 9.5 million vehicles - Al-Haji’s argument about EV-driven petrochemical demand Gasoline displaced by China EVs: ~270,000 bpd - Al-Haji’s estimate of fuel displacement Oil use to produce EVs via petrochemicals: ~600,000 bpd - Al-Haji’s estimate of upstream oil demand OPEC 2023 demand estimate: 2.5 million bpd growth - Cited as too high versus realized demand U.S. historical production estimate mentioned: 1.25 million bpd forecast vs 1.4 million bpd actual growth - Al-Haji discussing forecasting errors; likely referring to growth contribution Uranium spot level: above 100 - Post-game discussion of uranium breakout VIX level: around 13 - Post-game discussion of low volatility SPX spot: approximately 4,865 - Post-game options level discussion SPX call wall / put wall: 4,900 / 4,800 - Post-game options levels QQQ spot: approximately 427 - Post-game options level discussion QQQ call wall / put wall: 430 / 420 - Post-game options levels SPX implied move into Feb. 16 OPEX: +/-110 points - Post-game options analysis QQQ implied move into Feb. 16 OPEX: +/-14 points - Post-game options analysis March rate cut odds: 44% - Post-game discussion of FOMC expectations

Pivotal Quotes: "Absent any political event that destroys capacity or lockdown capacity, this prices Brent in the seventies and low eighties, probably this is going to be the most common throughout the year." — Anas Al-Haji: 2024 base-case crude price outlook "The main concern right now is really Egypt, is not Yemen, and not anything else." — Anas Al-Haji: Explaining the true geopolitical risk from the Red Sea/Suez disruption "The serious shortfall of the point where supply just can't keep up with demand is late 2020s, 26, 7, 8, in there somewhere." — Anas Al-Haji: Longer-term energy crisis timing

Implications: 2024 likely stays range-bound, but Red Sea/Suez fragility and Egypt’s instability are key tail risks. Investors should watch spare capacity, time spreads, and China’s petrochemical demand as leading indicators of a larger late-decade energy squeeze.