From Oil to AI: Markets Navigate a New Wave of Uncertainty

Sam (0:00)

To discuss the trends moving the market now, let's welcome in our next guest, Corey Ruth, Political Strategist and Global Business Executive. Good afternoon to you, Corey. Happy Friday. Look, obviously, we've seen more geopolitical risk, premium being priced into oil this week, with a lot of the back and forth that we've heard about. We've got some relief, obviously, from President Trump sort of signaling that he will not attack before the midterms. But I want to talk about it from a business perspective, because we heard from Delta today, they do not have a consumer problem at all. They've got a fuel problem. So if one of the best airlines in America that is well hedged and actually has exposure to refineries, has a fuel problem, what does it say for the rest of the bunch and for the rest of the earnings season, do you think, for every other company in the world?

Corey Ruth (0:44)

Yeah, I mean, while you mentioned Donald Trump's announcement about the not attacking Iran until after the midterms, which is an interesting sort of benchmark, but also a big story as the market closed this week was Trump's announcement on Truth Social that he struck a deal with Vladimir Putin to open global markets to Russian diesel.

We've seen that kind of effect, diesel futures, which fell sharply on the announcement, down nearly 5 percent.

The deal appears to involve already refined diesel, not Russian crude that has to be refined in US refineries. So that's finished product that's going to the global market. I saw your last guest, he made a good point that 300 metric tons, that's about 2 million barrels, increase into 500 in November, potentially to 3 million. It's significant only if we get to that 3 million potential tons. And that relies on a big if, right? So we're going to have a lot of potential for Russia's damage facilities, being able to consistently produce export quality, low sulfur diesel in the promised quantities without hurting his own domestic needs. So this is important to your point, because in the backdrop of what's happening with Donald Trump's announcement that he won't be attacking Iran until November, we have this potential deal with Russia. If Russia can keep up with his promises, that might have an impact. But that's all happening against the backdrop of increased tanker attacks in the Strait of Hormuz. So we've seen this at wartime highs. Generally, you see these surges, the closer each side feels that they're getting to a deal. So Iran is raising the stakes and raising their own leverage by choking off oil exports during negotiation. And the US is doing the same by raising sanctions and continuing the economic blockade. All that to say, uncertainty. And we see how it's impacting Delta. And so that's going to have a ripple effect, certainly across the airlines, American, which has more leverage than Delta. That's going to have some telling signs. Now, the CEO of Delta though, did admit that buyers seem to be willing to pay the higher prices.

Marlee (3:14)

And Corey, you really highlighted the word uncertainty there. I mean, and let's add into the uncertainty around pricing here, that we have Hurricane Isaias now heading for the Gulf Coast and shutting down, at least, as last I checked, about 25% of production. How significant is that supply risk and the potential ripple through in terms of keeping prices elevated?

Corey Ruth (3:39)

Well, for one, it's keeping me in Atlanta right now, right? So I'm not supposed to fly out later tonight, but you're talking about a category 3 storm, 120-mile-per-hour winds.

There's about 63% of Gulf oil production that's shut in, and it's 1.2, excuse me, 1.28 million barrels going offline, 121 platforms evacuated. So how long that shutdown last matters? And if production is able to resume quickly, we could see supply pressures ease, but it all depends on how the path that that storm takes tonight and into tomorrow. And it also depends on how quickly we can recover.

Sam (4:25)

I wanted to ask you about what we're seeing as far as AI, just sort of jump around a bit because I know that you've been looking at this quite closely as well. I mean, we've just had a fascinating chat about some of the data center pushback.

Maybe it is more of a political issue to some, but I'm interested in what this week in particular has told us about the sourcing of capital, particularly when you're talking about sovereign wealth funds, when you're talking about the private sector rather than going to the public markets. I mean, obviously we've just had this Australian IPO hit a snag. It's now talking about, I'm going to obviously the private markets, we've got SoftBank now talking to reportedly, folks over in the Middle East. What is that telling you about the enormous, how capital intensive this AI infrastructure build out, and the way that companies are going about getting this money?