$20 to $147 Oil: Super Spike vs. Super Vol

3:10The career arc — Petrie Parkman, JP Morgan, then Goldman in July 1999

• Started in 1992 in Denver at Petrie Parkman, four years on the buy side at JP Morgan Asset Management, then Goldman Sachs on July 12, 1999 — into the teeth of the internet bubble.
• Handed the integrated oils: about a dozen companies, and energy still ~8% of the S&P 500 even as tech took all the attention. A colleague covering an internet sub-sector told him "I'm so sorry" when he said what he was launching on — and was gone within six months.
• His read on longevity in the seat: "even when it's out of favor, people care about the price of oil, whether they should or shouldn't."

6:06The Goldman commodity franchise he married into — J. Aron, Strongin, Currie

• J. Aron (bought at the height of the early-1980s commodity super cycle, and where Lloyd Blankfein grew up) was fully integrated by 1999; the integration friction described in Blankfein's book had long passed.
• Steve Strongin, a Chicago-trained economist, started the commodities research effort in 1994; Allison Nathan and then Jeff Currie followed. Murti knew all three as clients from the buy side.
• Strongin became global director of research and one of Murti's core mentors — and, to his credit, "he found people as good if not better than him."

9:53The II poll and why the old sell-side research model broke

• The Institutional Investor rankings were meant as a proxy for commission and banking value, but "that poll drove behaviors that ended up being not compatible with being a profitable organization" — overhiring analysts in sectors that generated neither, and marketing to big II voters rather than real revenue clients.
• Goldman was among the first majors to break it: "this sounds crazy — we focused on our best clients," and shifted to one senior person owning a business unit with juniors underneath.
• His defence of the shift: better information systems let an analyst do more with less, and PMs often want breadth across sectors more than depth on six names.

13:39"You don't complain about things you don't care about" — the differentiated-call standard

• Managements complain, bankers complain, buy-side clients complain: "the fact that they're complaining means you're important and they value you."
• The bar he set as co-director: don't be "plus or minus 3% of consensus." "I don't need to pay you if all you're going to do is regurgitate what every other analyst or sell-sider is saying out there."
• But: "You can't make up differentiated calls. It had to be based on real research." Every sector rotates in and out of favour — the job is to get there first and be bold enough to say it.

15:46The director-of-research years — and why he retired in 2014

• Partner in 2006; 2012–14 co-director of Americas equity research (US, Canada, Latin America) with Bob Boroujerdi — "that job was the job that absolutely killed me."
• His wife's line is what tipped it: "you still work a gazillion hours… but you don't seem happy doing it anymore."
• Twelve years later he still identifies as an equity research analyst, now covering energy, power, new and old energy at Veriten. "Best decision I made was actually to join Goldman and then the other best decision was to actually retire from Goldman."

17:53The company calls that made him — Amerada Hess both ways, then Murphy Oil

• Amerada Hess: a sell on operating disappointments rode the stock from 85 to 50, then "we double upgraded it from sell to buy at 50" — "I take a lot of pride in having called it correctly both ways."
• Murphy Oil: added to the conviction/recommended list on the 4:10 call the morning his first daughter was born. Two dry holes in Malaysia followed and the stock fell before the third well; he held the call — "their base business, I think, is worth the price of the stock. You're not paying anything for this phenomenal Malaysian upside." The Kikeh discovery in Block K vindicated it.
• The psychological point: "to be right, you also do have to be wrong. That suggests you're taking some risk."

20:43The $15–$20 world and the race-to-the-bottom oil-price contest

• The 1970s boom peaked around 1979–80 and "definitively crashed in 1986" when Saudi cuts failed and OPEC flooded the market — then 15 years of $15–$20 oil.
• The winning corporate strategy was restructure, cut cost, downsize, stay capital disciplined — Lee Raymond's ExxonMobil, Lucio Noto at Mobil, Ken Derr at Chevron.
• Analysts and CEOs held a "who can have the lowest long-term oil price contest," fighting over 50 cents a barrel: "Shell came out with 14, then Lord Browne came out with like 12… a race to the bottom at what turned out to be the trough of the cycle."

22:23The screen that started it — top projects, forecast 3%, delivered zero (twice)

• Michele Della Vigna, then a junior analyst out of college, built the first "top 50 projects" report; a top-75 version followed.
• Both years forecast 3% non-OPEC supply growth and both came in at zero, each time with a different excuse (Gulf of Mexico hurricane, Nigerian disruption).
• The inference: exploitation of the nearby fields from the 70s–80s boom "was starting to peter out" — companies were collectively missing production forecasts, and that drove non-OPEC. Simultaneously China joined the WTO and demand surprised up.

23:44The super spike call — $40 to 105, and what the two words meant

• Consensus then: $40–$50 oil requires Saudi Arabia to be destroyed, and would cause a deep global recession. Their counter-work showed oil and gasoline spending had underperformed the economy for 20 years, so it would take a far higher price to limit demand.
• Oil was ~$40 when they made the call. Gasoline had to reach "at least $4 a gallon," which backed into a $100+ crude price to ration demand to available supply.
• The naming was deliberate: "super to suggest this is multi-year in nature. The word spike was meant to say there will be a downside at some point, but it's not a short-term downside."

27:30The signal was the 5-year forward, not front-month inventories

• Because longer-term demand growth was uncertain to be met, countries and others were building inventory — so the front end looked soft while "all the action in oil prices was actually at the long end of the curve. It was the 5-year forward oil which was rerating up."
• Critics called it speculation. Their rebuttal was capital intensity: "the return on capital at $100 oil turned out to, with years of hindsight, to have been no better than the return on capital at $20 oil."
• The lesson embedded here: in a $15–$20 world, short-term inventories were all that mattered; in a structurally repricing world, they were the least informative series on the screen.

28:36Forecast retrospectives — stop excusing the miss

• "One needs to do retrospectives on here's what was forecast and here's what came about." Most people instead itemise excuses: "people are very willing to blame others rather than themselves on mis-forecasts."
• "If in one year it's Gulf of Mexico hurricanes, the next year it's a Nigerian disruption, at some point you have to take responsibility that stuff happens in the world."
• On the agencies: "The IEA has phenomenal historic data. They've always had issues with the forecasts" — true in the net zero era and true back then. Never take the forecast as given; score it.

37:51March 2005 — the call blows up, and research independence holds

• The view formed in 2004; "the report that got attention was published on March 30th or 31st, 2005." Hank Paulson, still CEO, took questions on it at the annual meeting and called Murti "the oil services analyst."
• He only learned years later that Lloyd Blankfein came down to research asking "do you trust this analyst?" — and Strongin plus the directors of research (David Kostin, Laura Conigliaro) stood by him without telling him. "There's no point in having a research department if it's not going to be independent."
• The part that stung wasn't the professional pushback — it was anonymous public abuse, including a caller claiming the call would ruin his chimney-cleaning business. "That took a number of years to learn."

42:52The regret — profitability peaked at $60 oil, and one analyst saw it

• Returns on capital rose with oil from 20 to 60. From 60 to 100 they did not: "profitability peaked for the sector at about $60 oil" in 2007, high-teens and levelling, as capex and cost inflation overwhelmed the price.
• By 2012, sector return on capital at $100 oil was "no different, zero difference than when oil was at 20 in 2004. They completely competed away the excess return." So the commodity call was right and the equity overweight was wrong.
• One buy-side analyst at T. Rowe Price called him: "based on your numbers and based on your analysis, it looks like profitability has peaked and it's only going to go down from here." 2015–20 proved it. "Only person I know that got it truly right."

45:47July 11, 2008 at $147 — the "Jeff and Arjun show"

• He and Jeff Currie were in São Paulo the day oil topped; a Goldman vice chairman introduced them as "the Jeff and Arjun show." His own gloss: "probably a sign when you're being treated as a rock star in a commodity sector" — a near-term-peak tell.
• They did not call the rollover. They did, in his view, get the trough and the shape: cash production cost, "short-lived," then back to 100 — "it's going to have to test 30 before it rebounds."
• Jan Hatzius' 2009 "green shoots" note at S&P 600 was the trigger to reinstate the back-to-$100 call. 2010–14 delivered five years of $100 oil.

48:34Super-Vol vs Super-Spike — what is structurally different now

• 2004–14 was demand surprising massively up with no obvious source of supply. "That's not what we're seeing right now."
• He rejects peak oil demand ("we don't think any of that is true") but is "also not super bulls on oil demand" — about a million barrels a day of growth in this economic environment.
• And that million "you can meet… through shale grinding higher, through some Middle East supply expansions" plus a little exploration. No super cycle needed to clear it.

49:41The age of drones — the Strait open, closed, open, closed

• Russia–Ukraine, "supposed to last weeks or months at most, is now in year five." Drones and defence tech are "a total game changer for some of these otherwise smaller countries" — Iran is causing havoc in the Strait of Hormuz despite overwhelming US military superiority.
• "Everyone's waiting for these crises to quote be resolved… it'll be open and it'll be closed and it'll be open and it'll be closed many, many times in the coming years."
• The price implication is a range, not a level: "we will at times test 50, we will at times test 100."

50:59Reshoring, China's overcapacity, and the post-war order unwinding

• "The idea that the US can just outsource everything to China… was not ever a sustainable strategy and we're course correcting maybe imperfectly with a lot of noise."
• China's manufacturing overcapacity "is a question for every other country in the world" — and Chinese output is genuinely low cost, so fighting the deflationary impulse while motivating domestic reshoring is hard everywhere.
• Open question he poses without answering: "Can the US be the reserve currency in the world if it wants to reshore its manufacturing?" All of it feeds the volatility side of Super-Vol.

52:32Where the supply actually comes from

• Shale "is still grinding higher. It's doing better than everyone expected." Positive on Middle East supply from Iraq; expects Saudi and UAE to "figure things out"; Libya/Algeria/North Africa "looks promising."
• Vaca Muerta growth in Argentina, and Latin America broadly has had "major political changes that speaks to the potential for higher oil supply."
• Net: "Canadian oil supply can grow, shale oil can grow, Middle East oil supply can grow, Latin America could grow. So we don't see super cycle, but we do see a lot of volatility."

53:07Canada under Carney — hostile rhetoric produced a constructive result

• Speaking "as an energy analyst," he thinks the US rhetoric toward Canada "had the positive impact on Canada of unifying the country behind Prime Minister Carney."
• And it moved Carney "from his previous net zero, Glasgow Financial Alliance for Net Zero, 'let's keep oil on the ground' view to now embracing things like energy infrastructure, oil pipelines" — execution still unproven, but the framing has changed.
• His baseline was already positive: "the Canadian oil and gas sector did well in a hostile environment… if it has a more supportive environment, that's only going to be good things." He also wants Canada to build LNG export capacity — Canadian gas is "even more stranded" than US gas.

55:41Refining is the tightest thing in energy

• "The age of drones has not only disrupted supply, but it's had an even bigger disruption on the refining side of the business, especially in Russia, also the Middle East."
• "There is a tightness there that we're going to need to expand refining capacity. I'm not sure where we're going to do that. It's definitely not a popular thing to grow refining supply."
• Verdict: "that is as tight of an area as exists in the energy markets today."

56:26The spike already happened — it just happened in the cracks

• The "$150 to $200 a barrel" framing was, he thinks, shorthand applied to the wrong instrument: "If you look at diesel prices, if you look at refined products around the world, we have had the spike that people were talking about."
• Reading off his screen: the Gulf Coast 3-2-1 WTI crack spread is $64/bbl, versus a typical ~$20 and a bull-market ~$30. "It's double that."
• "On individual days the diesel crack… has been over $100 a barrel when again normally 20 or 30 would be… a very, very good number." The driver: Ukraine hitting Russian refineries "a thousand kilometers away," plus product disrupted out of the Strait.

57:33China's 12-to-7 import cut — the reason crude didn't spike

• "China reducing their oil imports by anywhere from 4 to 6 million barrels a day is as big a factor as any for why the crude price itself has stayed at a high level, but not like $150 to $200."
• "I'm going to say with maximum confidence, China going from 12 to 7 million barrels of oil imports… is completely unsustainable." Some of the 12 was strategic build, but they must be drawing it down.
• Expect a replacement bid in a future down cycle — "you will see Chinese and global SPR builds, especially if oil was to someday pull back to $50 or $60" — which is what cushions the downside. Timing the resumption month "is definitely not my strength."

59:37A record-low SPR and the 4 mb/d Canada dependence nobody mentions

• Does the record-low SPR worry him? "Yes, it does." Being the world's number-one oil, NGL and gas producer is not the same as being independent: "just because we are not as dependent on the Middle East as we once were doesn't mean we're independent of all this stuff."
• "We are hugely dependent and no one should ever forget on the 4 million barrels a day of heavy oil that comes from Canada that we then refine and export to the world" — a positive trade impact "that often gets forgotten by many leading politicians."
• China "has shown the strategic benefits of just having an overwhelmingly large SPR." His policy line: keep the SPR as full as possible and keep US–Canada energy integration out of the trade fight.

1:03:03The Canadian names and plays he has been positive on

• Four years of Super-Spiked have "generally highlighted the attractiveness of Canadian oil and gas" — the sector "was always underappreciated for how good the profitability was for especially the leading Canadian oil sands players," most of them integrated.
• "And then there's Tourmaline which has always been a very successful natural gas producer. They have their own version of integration with some midstream and takeaway capabilities" — plus junior E&Ps that have had success.
• Plays: positive on the oil sands "for sure"; the Duvernay and Clearwater "we find of interest"; the Montney "we've generally been very positive on." He thinks Canada can develop its own resource — "Venezuela needs foreign companies… Iraq needs foreign companies. Not true of Canada."

1:06:50The "lucky 1 billion" — reliability and affordability, not CO2, organise economies

• Question from Jamie Heard (now Tourmaline's CFO) on how the geopolitics of energy evolve over five years.
• His observation, independent of where you rank climate: "no person, no country is going to model their economy on a CO2 basis. That it is not the organizing principle for anything." What people actually demand is reliability, availability, abundance — and affordability.
• That argument reinforces new energy tech rather than dismissing it: a billion-person economy can't import its way to rich-country energy use. India at 1.4 barrels per person today would need 44.5 mb/d of imports at 10 barrels per person — "a ridiculous number" — which is precisely the motivation for EVs, LNG trucks, and controlling battery/lithium/cobalt/copper supply chains.

1:12:59Data centres are this generation's NIMBY fight — what tech can learn

• The energy industry's 2020–23 failure was communication: executives "came out with various ESG reports that said, 'Hey, we're not as evil as you think we are.' Like that was a completely unsuccessful strategy. Events and economics ended up bailing them out."
• He is blunt that this was a choice, not a time constraint: "I really don't like that they were not willing to defend themselves when it mattered most."
• Tech's version of the error is different — arrogance, and leading with "productivity gains" that "de facto means job loss." His read: the real objection to data centres is jobs, not water usage.

1:13:46The only two who defended the industry — and the one European exception

• "It was Amin Nasser, the CEO of Aramco, and it was Chris Wright… the CEO of Liberty Energy with this Bettering Human Lives report. In my opinion, no other CEO did that in any sort of public way."
• US, Canadian and Western European CEOs alike "totally caved to the absurd 'we're going to transition our companies' type strategies."
• "My exception to that would be Total and Patrick Pouyanne. I actually always liked Total's strategy." The failure to defend the sector is, in his telling, "why I started Super-Spiked in the first place."

1:16:50No political role — "I am motivated to make the correct analytical call"

• Asked whether he could be the Chris Wright of a future administration, he points at the DR job as the disqualifier: internal politics at a 100% commercial firm is what he "really rejected most about the DR role."
• "When you work for any president… you have to adapt your views to the president, at least publicly" — the Granholm/Biden and Wright/Trump pattern.
• Where he thinks he adds value: "helping people think through here's why we use energy, trying to speak in normal human language." And the distinction that closes it — "I am motivated to make the correct analytical call, which is a different thing" from being motivated to win political battles.

1:18:48What would flip Super-Vol back to Super-Spike

• Trigger 1 — demand: global GDP "really getting back to over 4%," which would put oil demand growth back at "a million and a half barrels a day." He uses Goldman Sachs' economic forecasts as the input.
• Trigger 2 — supply: "we'd have to see supply truly disappointing like we did again 25 years ago. We're not seeing that today." US lower-48 crude is growing 300,000 b/d this year — off capital budgets set at ~$60 and mostly not raised since the war started ("even I would have said probably flat at best"). At Brent $85 / WTI $82, if 2027 budgets get modelled at $70–80, does shale grow 500 kb/d?
• "Demand is a surprise on the upside, supply surprise on the downside. Neither of those two things are we seeing yet. And that's what we would need to see."