Ten31 Timestamp: Gilt Trip

Marty Bent (0:00)

John Arnold, here we are, Monday morning, back at it.

John Arnold (0:03)

Back at it again. The situation never sleeps except for when we take weeks off for travel convenience.

Marty Bent (0:10)

Yeah, it was a good week. We had our Ten31 portfolio company retreat in Utah.

It was a great week. Feeling refreshed after it.

John Arnold (0:18)

Moisturized, unbothered, in our lanes, collectively.

Marty Bent (0:22)

It was a good time. It was a good time. A lot of productive conversations in Utah this year. But with that, we got to get back. And we were saying last week when we were driving from the airport to our undisclosed location in Utah that it was a pretty big bummer that we didn't record that Monday because something we've been covering popped off. And I'll just leave that as a cliffhanger because we'll get to it later, but we'll jump right into it. Talking about one of the recurring themes of the last six months for us, which is the flow of oil, particularly from the Middle East.

A lot of people worried that the war in Iran is going to prevent oil flows, we're going to have this diesel crisis, and obviously crude and diesel prices have gone up significantly. But one thing we've been trying to do is get access to the real data behind the scenes. And you have it here in a couple of slides from, it looks like this is a Goldman Decker Morgan Stanley Decker, JP Morgan, JP Morgan. We've got Middle East crude flows, Middle East refinery products flows, and they seem to be up and to the right since late March, early April of this year.

John Arnold (1:26)

Yeah, I think, I mean, this was the big story last week. And I think it's kind of a bit of a Rorschach test where you can kind of see what you want out of it. You know, the left-hand side is what I think got most of the attention and probably rightly so that basically last week crude flows got back to roughly pre-war levels, which is kind of, you know, a pretty big narrative violation for a lot of the, you know, the doom posters and the influencers that were trying to convince everyone that, you know, if we didn't get this normalized in a couple of weeks, then oil flows would be choked off forever and the world would immediately plunge into chaos. And obviously there have been significant issues and especially at kind of the margin of, you know, countries with much less energy security, there have been significant issues, but this chart is just not, I think, definitively not what the consensus narrative would have had you believe on the left-hand side here six months ago. So no doubt pretty significant and a culmination of kind of the things that we've been talking about over the last few months where you've gotten these like dribs and drabs of information about the US helping with dark transits, you know, in different kind of ways, different routes, kind of around Oman to avoid the straight-up Hormuz. And that's led to kind of this rough normalization. Now we'll see if it holds. Things are not out of the woods yet, and things are far from kind of normalized as we can all tell. But I think the left-hand side chart is pretty, is a good thing to keep in mind every time that you kind of evaluate geopolitically like what's going on. The next kind of doom post headline that you see saying that it's all about taking a plunge into unmitigated chaos with no rattle rounds. Right-hand side, I think, gives you a little more of a nuance view. I think left-hand side chart was the foundation for a lot of victory lapping that I saw last week on Twitter, a lot of everyone who was opposed to the conflict in Iran just has TDS and is a complete moron, and was a beta loser.

Right-hand side, maybe is a little more nuance and it's more relevant for the diesel situation.

That's where flows have not gotten nearly back to normal despite some of the workarounds. That's a reason to stay somewhat cautious, at least on the industrial side of things. Obviously, diesel is a massive input to industrial economy, to shipping logistics both in the US and everywhere. And if you're trying to ramp up industrial production as a means of growing your way out of debt, that's not a chart that you really want to see. And we'll talk about more maybe later in the episode some workarounds to that that have geopolitically interesting implications. But yeah, something for everyone here as we survey what's going on in the Persian Gulf now.