Again, the recession is sort of anticipated, expected, but we haven't seen it yet. If we don't get a sufficient slowdown - and we've talked about this, right? If we don't get a sufficient slowdown in demand growth, most balances into the second half of the year point to continued well-above-normal draws in the crude S&D. Hussein Allidina: Yeah, so I think it's very important. Where is it? And with that kind of uncertainty, what does it actually mean for crude? Greg Bonnell: I think we can dial back into late last year and say, it's coming, it's coming, it's coming. Greg Bonnell: And we've been living with that fear for quite some time. Greg Bonnell: Let's talk about that macro, because what we're basically talking about is the fear of recession. I don't think the crude market is going to be able to stand on its own until we see the expected draws in the second half of the year, because the macro, again, is so concerning. This year has been a choppy one, partially because China has disappointed expectations, partially because Russian volumes have stayed elevated. But I think this market has been a very challenging one to trade in the first half of the year, very different than last year or the year prior, when you heard about commodity trade houses posting record profits, guys at hedge funds making record numbers. I think Saudi's decision to unilaterally reduce production by a million barrels a day in the month of July only maybe is meant to clean up the front of the market and/or scare the shorts.
So you've got these sort of, I think, conflicting currents. If I look at even yesterday, the day we released gasoline demand data or released sort of oil demand data for the US, gasoline demand is averaging above the five-year average, even if I removed the weakness in 2020. So I think it's kind of this cross currents between an expected challenge macro, which we believe is forthcoming, right? We've had 400 or 500 basis points of rate hikes that should impact demand growth and economic activity. We've had robust Chinese import data for both March, April, and May. A couple of days ago, we had demand data out of India, which was at a record high. But the data to date is actually showing still firm demand, whether it's gasoline demand in the US. We've talked before about how demand is expected to weaken as we get this sort of well-anticipated recession. The macro is overwhelming, in my opinion, the relatively constructive micro data that we've seen. And I think that the macro is concerning. Hussein Allidina: Yeah, it's a good question.
And then things sort of go sideways in the trade. You get a bit of a boost in the price of crude. I mean, this isn't the first time we've seen this playbook, whether it was the Saudis this time, it was OPEC before. Great to have you back on the show, Hussein. Joining us now to discuss the longer-term dynamics in the market, Hussein Allidina, Head of Commodities at TD Asset Management. But the trade has been choppy amid all these concerns about global growth. Greg Bonnell: News of a Saudi production cut did give the price of oil a bit of a boost earlier this week. Greg Bonnell speaks with Hussein Allidina, Head of Commodities at TD Asset Management, about the path ahead for oil and the outlook for energy markets. Oil prices have been mixed as traders weigh Saudi Arabia’s announced production cuts and concerns about global demand.
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