Greg Smith: Generate Investment Specialist discusses global oil prices following Iran closing the Strait of Hormuz

Millions of barrels remain stuck behind the blocked the Strait of Hormuz. 

The price of crude oil has increased 35% since last week. 

Generate Investment Specialist Greg Smith told Mike Hosking that only a few ships are being getting through. 

He says Chinese ships are getting through as Iran still needs them for revenue. 

The Commerce Commission says international conflicts will affect prices but it expects retailers to keep prices competitive. 

It says it will call out any behaviour which impacts New Zealanders' ability to get a fair price.

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Episode Transcript

Speaker 1 (00:00):
From general rate Monday morning, Grigsmith, how.

Speaker 2 (00:02):
Are you good morning, Mike.

Speaker 1 (00:04):
Well, that's job's number. That was a shocker, wasn't it.

Speaker 2 (00:07):
Absolutely Yeah, all things considered, they'll have to say the
US in disease did held up really well last week,
and despite the scursion or PUS, which we'll get to
in a minute. But yeah, the US economy lost ninety
two thousand jobs in December. That's the worst in four
months and a big miss versus expectations for a gain.
It's the third time in five months jobs have declined.

(00:27):
And also the revisions might so jenuy was revised slightly lower,
but December was revised down by sixty five thousand to
a loss of seventeen thousand jobs. This weakness has been
brewing for a while. Unemployment rate that ticked up to
four point four percent, participation rate people looking for work
fell as sixty two percent. That's its licence twenty twenty one.
So yeah, US workers are stepping back from the job.

(00:48):
There were a few mitigating reasons. Mike weather was one
or that affected leisure, hospitality, and construction. There was a
healthcare strike und about thirty one thousand physicians walked off
the job and made provider and the second lost job
the first time since January twenty two. And healthy has
obviously been a reliable source of jobs, says the government.
And of course there's been a clamp down there as

(01:10):
well with federal job cuts, immigration also having an impact.
And AI do we say productivity gains are driving leaner
staff levels, particularly in the tech sector and that's been
losing jobs for a year. Wages are actually strong long
term unemployment job jump there my every job was spelled
twenty five point seven weeks. It's the longest since December

(01:31):
twenty twenty one. Basically, it's all contrast with recent data
decus the labor markets, finance footings that's not really happening,
and the consumers weakening as well, it seems retail sales
they were down point two percent January, So Mike, all
a bit tricky for the feed. Obviously we've got energy
prices rising as well, soak inflation. But markets, of course
their view, they've bought Ford expectations for rate cuts to

(01:53):
July and a greater chance of two cuts before year end.

Speaker 1 (01:56):
Right, so where are we going with oil this week?

Speaker 2 (01:59):
We said WEEKO is going to be a big swing factor,
and we've certainly got that in spade. So WTI crude
all up thirty five percent last week, up twelve percent
on Friday. It's now having nine was a barrel. Remember
it started around about sixty seven a barrel before the conflict.
We all know it's the straight up the moves. Twenty
percent of global all goes through there. That's not moving

(02:19):
millions of barrels being stuck there in the Gulf. So
you've got a right club cap by one point five
million barrels quate trimming output Qatar recons golf explorer is
going to have to declear force from dure. Some ships
might are getting through, but they're the ones identifying is
Chinese even when they're not. But obviously that's not a
trick that everyone can use. But yeah, ninety percent of

(02:40):
runs oil goes through China. It still needs revenues. That's
why they're probably getting a bit of a sight of through.
The Other issue, of course, as you mentioned, is insurance.
Now Trump has stepped up with this twenty billion dollar
reinsurance program. But yeah, we've got the monetary risk covered,
don't we, But the physical risk is still there, it seems,
so he's talked about the US Navy providing escorts, but
it's it's not really that practical. So before this all

(03:02):
kicked off yet around about sixty tankers using the straight
each day. The US Navy they've got over four hundred ships,
but only about fifty operation all of them are impoort
or on training, and they've got less than twenty in
the region. So yeah, near term it's looking a bit
tricky in terms of getting things moving all price. Of course,
that's going to have an impact for US. So I
see petrol prices are up and they're three bucks a

(03:24):
liter in some regions they could go high. Of course
we close marked and point in the Ministry of Business
and Innovation employments set over the weekend that were down
to around twenty five days of fuel supply. So of
course there will be other impacts as well, so mainfas
MD he said over the weekend, the price of everything
attached fuel will rise, including freight flights and every day.
Good so your fingers crossed. The Strait can get moving

(03:46):
so much.

Speaker 1 (03:46):
Exactly now LIFTANSA, which was a very good result because
we can't get on a plane fast enough. How much
of the Middle East was in that announcement.

Speaker 2 (03:53):
Yeah, I absoute a bit of an out like the
actual result full result was strong, and we've been talked
about how global year travel was roaring. So four year
revenues up five percent to a record thirty nine point
six billion, hundred thirty five million passengers. Over the year
of praying profit that was up nineteen percent two billion dollars.
But year, they said a bit of an understanding, of course,
but the war in the Middle East has made the
outlook more and soon and heavy reliance on golf travel

(04:17):
is a geopolitical achilles Heel for the sector. So one
interesting observation they said that flights over the past week
to Asia and Africa have actually been surging, so they're
actually looking at putting on extra flights to destinations such
as Singapore, India, China and the light. But yeah, they're
certainly going to be feeling in their cost based like
a huge field of certain extent kennylines. But it certainly

(04:40):
doesn't remove the impact, just delays it a bit. So investors,
they erected last week Aline she is under prefer pressure.
Liftanswer itself was down about five five percent. United Airlines
and Britisher Ways owner were down seven percent in New Zealand,
down around eight percent last week. That's the lowest since
we shut the borders, so certainly having an impact. And
I suppose it also means Mike at some point as

(05:01):
a fees are going to rise and that's going to
start heading travelers as well.

Speaker 1 (05:05):
And the numbers please.

Speaker 2 (05:07):
So the US market actually had a pretty well all
things considered, given the conflicent. I think it's a bit
of a disconnect. Basically, I think investors the scenes as
a relatively short conflict and certainly not prolonged. So dal
Jones was down one percent four seven five oh one
on Friday, s and P one hundred P five hundred
was down one point three percent six seven forty, down
just two percent for the week. Naris dack two two

(05:27):
three eight seven, down one point six percent on Friday,
but down just one point two percent for the week.
Of companies like Microsoft on the up fort one hundred,
down one point two percent on Friday, nick A up
point six percent, ASEX two hundred down one percent. In
the X fifty, we were down point seven percent, down
one and a half percent for the week. Oil as
mentioned that was on the charge up twelve percent ninety spot,

(05:49):
ninety gold ninety bucks five one seven one. Currency markets Key,
we fairly fled against the US fifty eight point nine
eight against the Australian dollar, were slightly lower eighty three
point nine to three British pound fur even down point
three percent. Japanese gen ninety three point one, that was
up point two percent. This week, we've sue plenty going on.
We've got some manufacturing sales numbers, business PI visit arrivals

(06:11):
in New Zealand. We've got China trade data that will
be closely scrutinized. We've got inflation in the US GDP
as well. In consumer conference, we've got some company earnings
as well, Mike c Att, Peckard, Oracle, Adobe.

Speaker 1 (06:22):
And Ali Baba.

Speaker 2 (06:23):
Of course, all eyes are going to be on the
Middle East, and of course we let strake ITTs moment
go well.

Speaker 1 (06:28):
Greg Smith from Generate Wealth and Key we save a
specialist for more from the Mic Asking Breakfast. Listen live
to news talks.

Speaker 2 (06:35):
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