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The Asset Class with Paul Gooden · Strictly Business

• 0:00
  You're listening to Strictly Business Podcast with Lindsay Williams.
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  The oil price is at a multi-week high,
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  but still only in the same sort of range that it was the end of October of 2025.
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  It's been stuck between $60 and $65 a barrel.
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  That's for Brent crude oil.
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  The last time I spoke to my guest today, it was around about $76, $77 a barrel.
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  He's Paul Gooden, Head of Natural Resources at Strictly.
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  at 91 in London, speaking to us incidentally from Jackson, Wyoming, where
• 0:35
  he's attending a conference.
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  That's the same Jackson, Wyoming pool where they have the Jackson Hole affair
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  every year, isn't it?
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  You're right.
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  That's where the central bankers meet.
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  Yeah, exactly.
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  If we won't talk about central bankers at the moment, we're going to focus on oil.
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  And just when you thought it was safe to be an oil analyst again, along comes Iran.
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  How big a deal is the potential continuing conflict in Iran?
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  In Iran, I mean, potentially quite meaningful.
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  Iran has the third biggest oil reserves globally, you know, produces north of 3
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  million barrels a day.
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  And look, what tends to happen is if you get kind of regime change,
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  it tends to result in a lot of factionalization, a lot of infighting,
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  which results for a period at in reduced oil flows.
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  So I think what's going on in Iran at the moment is potentially quite bullish for
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  the oil price.
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  But of course, bear in mind,
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  President Trump wants to keep oil prices down because the US consumer is very
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  sensitive to high gasoline prices, particularly going into the midterm
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  elections in November.
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  So I think Trump wants to keep oil prices down.
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  But certainly if they were to kind of take action in Iran or if there was to be a
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  regime change,
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  I think that could be tactically quite bullish for the oil price.
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  Even without Trump though there is a lot going on in the country.
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  There have been anti-government protests mainly apparently because of the economy
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  raging inflation, the currency collapsing, etc.
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  But even without Trump something might happen and we cast our minds back to 1979
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  when the Shah of Iran was
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  deposed and an Islamic State was instated.
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  And that's going the opposite direction, because I noticed that the son of the Shah
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  of Iran has been touted as maybe going back.
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  A little bit fanciful in my opinion.
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  But if you go back to 79, if it were as momentous as that occasion,
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  then it really could be something quite meaningful for oil.
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  Yeah.
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  And look, you point to kind of succession and what happens next.
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  And therein is the problem is in the different groups and factions will have
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  different ideas about
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  how they think.
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  things should proceed.
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  And that creates instability, that sort of generally disrupts flows of oil.
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  So look, it's certainly something that we're keeping a close eye on.
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  Without Iran, we've had Venezuela.
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  Venezuela is an interesting one, because although it's got a lot of oil under the
• 3:04
  ground and under the sea,
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  the fact is that that oil is sludge compared to Brent crude oil or West Texas.
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  So it's not quite as simple as that.
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  Maybe you could sort of encapsulate what's gone on
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  in Venezuela and what might happen to the oil price because of what's happened?
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  Yes.
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  So, you know, Venezuela, again, you know, very large reserves of oil, you know,
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  reportedly that the biggest reserves globally even more than Saudi.
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  But Venezuela doesn't produce a great deal.
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  It produces just below a million barrels a day.
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  The peak in the 1970s was sort of about three and a half, four million barrels a
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  day.
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  To put that into comparison, you know, Saudi produces about 10 million barrels a
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  day and the global market's about 100
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  million barrels a day.
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  So certainly Venezuela appears to be significantly underproducing relative to
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  the size of its reserves.
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  You're absolutely right.
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  Not all reserves are created equal.
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  A lot of the oil in Venezuela is so-called heavy oil.
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  Think of it as sort of peanut butter.
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  You need to put a lot of energy in to kind of get it to flow.
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  And then to kind of get it to move into pipelines, you need to to put diluent into
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  it.
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  So, you know, not the highest quality crude.
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  But what happens from here?
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  Trump had all the big US oil executives in the White House on Friday.
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  He's trying to corral them to invest more in the country.
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  The reality is I think most of them will stay on the sidelines until there is a
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  comprehensive framework on
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  security and around fiscal terms and about how...
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  how they're going to get access to dollars and to kind of get a return on their
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  investment.
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  Hopefully we'll kind of see that over the coming months in the meantime.
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  I think there is quite a lot that can be done to improve production just by getting
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  spare
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  parts into the country and by getting more personnel in the country and by giving
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  them access to diluent to
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  help the crew to flow.
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  So, you know, Most people are quite skeptical that Venezuela can increase
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  production in the near term.
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  My view is I think they can increase production by about half a million barrels
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  a day on a two to three year view.
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  So that's more optimistic view than I think most people,
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  but thereafter to get production up more meaningfully than that, I think it'll be
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  harder than people think.
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  It'll take a long time.
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  It'll take a lot of dollars.
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  But in the grand scheme of things, what's going on Venezuela is quite bearish for
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  the oil price because of course, you know,
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  more oil supply means lower prices.
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  And talking about bearishness, as I said in my introduction, the last time we
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  spoke, the oil price was in the high 70s. Okay,
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  it spiked to there and it came back down pretty quickly.
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  But it's been going down.
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  I'm just looking at the graph now of Brent crude.
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  It's been going down ever since.
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  And again, we've had a $5 spike recently because of Iran.
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  But it really does look like a market that's going nowhere.
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  It's either going to go sideways or down.
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  Again, that's my opinion.
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  I did see...
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  Paul, some pretty good trade figures coming out in the last few days for I
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  think the third quarter of last year.
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  And it was dominated by energy products.
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  So the tariff situation that emerged beginning of last year from the Trump
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  administration hasn't hit global
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  trade as much as people had feared.
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  People have adapted.
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  And that's obviously quite good for oil when it comes to economic activity.
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  Yeah, look, I mean, when it comes to the oil price, there are there are sort of
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  many moving parts to what's going on.
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  We referred to two of the geopolitical situations going on with Venezuela and
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  Iran, that the third one, of course, is Russia,
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  Ukraine.
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  I mean, to take a sort of step back, I would kind of sort of focus off what does
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  President Trump want over the next year or so.
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  And I would kind of say he has the sort of the political levers to kind of make that
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  happen.
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  And certainly he wants low oil prices in the first half of this year.
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  because that makes it easier for the Fed to cut interest rates,
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  which is something he wants them to do ahead of the midterm elections in
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  November.
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  So that's the backdrop, I think, in terms of kind of like the next sort of six
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  months, Trump wants lower oil prices.
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  And I think he can kind of pull the levers to kind of make that happen.
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  Beyond that, we have to kind of remind ourselves that there are potentially some
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  bullish straws
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  in the wind here.
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  So on the supply side, you know, In the next three or four months,
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  most of OPEC's spare capacity will be back on the market.
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  And that had been a big overhang for the oil market over the last two or three
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  years.
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  So that is one thing to consider.
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  The next thing to consider is US shale generally is running into slightly tougher
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  geology
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  as they've drilled up the very best stuff.
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  And so that is another big overhang on the oil price over the last decade or so.
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  So, I can kind of see a situation by the middle of this year whereby those two big
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  overhangs are removed.
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  Meanwhile, in terms of sort of when is peak oil demand, I think that is getting
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  pushed out.
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  EV penetration is not rising as quickly as people had hoped.
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  So what I kind of see happening is the oil price kind of sort of drifting down the
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  next few months,
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  but potentially creating a nice buying opportunity around mid-year.
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  That's my base case.
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  You know, we need to be humble and we need to recognize that, you know, all sorts of
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  things we don't expect can happen.
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  And so, you know, there are sort of geopolitical sort of skews both on the
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  upside and on the downside.
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  So if there is peace in Russia and Ukraine in the next few months,
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  that's a pretty bearish deal price because suddenly lots of Russian crude will become
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  available.
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  with Iran.
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  Yeah, so it's a geopolitical play at the moment, apart from the basic fundamentals
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  of supply and demand that you've quite neatly
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  outlined.
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  You've got to decide whether Russia, Ukraine is going to be peaceful anytime
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  soon.
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  You've got to do the same with Iran.
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  And you've got to say, well, Venezuela hasn't been concluded definitively.
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  But on the other hand, it's moving towards a bearish case.
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  So it's all to do with taking your pick really, Paul.
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  Yeah, look, I mean, I'm always reminded of that old saying that there are two types
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  of oil experts, those who don't know and those who don't know they don't know.
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  Which, you know, it just really reminds us that, yes, I mean,
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  there are all sorts of exogenous factors here that can kind of create quite big
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  volatility.
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  But base case is there's a lot of oversupply coming in the first half of
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  this year, and the market has to absorb that.
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  But yet thereafter, you know, we are potentially putting in place the
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  ingredients we need for a a multi-year bull cycle.
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  Paul, thank you very much for your expert time as always.
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  Paul Gooden is Head of Natural Resources at 91 speaking to us from Jackson,
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  Wyoming.
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  The views and opinions expressed in these podcasts are those of Lindsay Williams and
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  various contributors and do not reflect the policy,
• 10:18
  position or opinion of any other agency, organization,
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  Assumptions made on the analyses are not reflective of the position of any other
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  entity other than the speaker or
• 10:34
  the author.
• 10:39
  and rethinking at any time.
• 10:41
  Please do not hold us to them in perpetuity.