David Hay — The Trade Everyone Is Missing Right Now

0:00 Host setup — Fed-hike odds jump from 0% to 30%

• Higher oil prices have made inflation expectations sticky: the long end of the curve is up and year-end Fed-hike odds have gone from basically zero to ~30% — yet equities sit at all-time highs, unlike 2022 when hikes hit stocks hard.

0:33 Momentum vs the stacking negatives

• Hay's answer: there's simply too much momentum and money flowing into the market. But the negatives are stacking — the oil-price surge, plus the "tremendous amount of supply" from the mega-IPOs — and "you get enough straws that it breaks the camel's back."

0:54 The Fed is a sideshow — energy is the main event

• One hike on its own wouldn't be "that deleterious" — "kind of a sideshow, to be honest." What's happening in the energy world "way outweighs the Fed."
• The catch: a persistent energy crisis "could cause the Fed to tighten a lot more than one time" — energy drives the Fed, not the reverse.

1:19 The Rothman chart — ~1B barrels lost, heading to 1.5B

• Week 13 going on 14 of the shutdown: Cornerstone's Mike Rothman tallies roughly a billion barrels of lost output, on its way to a billion and a half — with $80 the projected price by December.
• "The market can ignore these things for a while, but at some point reality bites — and bang, bites hard."

1:57 No demand destruction yet — the spike has to do the work

• Flight data is still strong — no demand destruction. Because the shortage is so acute, "you're going to have to have a major price spike" to force demand down until supply returns.
• The base rate, from Morgan Downey's Oil 101: global oil demand has contracted year-over-year only four times in 160 years (one of them COVID) — demand almost never does the adjusting on its own.
• Supporting facts: the Permian — nearly all of global supply growth via US shale — is trending down, and oil inventories have collapsed. The one offset: the global economy is much less oil-intensive than it used to be, though the developing world's growing affluence keeps total energy demand rising.

3:00 Data centers — 37 GW under construction, 146 more committed

• Data centers under construction right now need 37 gigawatts — each gigawatt "equivalent to a large-scale nuclear plant." Another 146 are under firm commitment; he thinks many get canceled for lack of energy, but even half (~90 GW) is staggering.
• Electricity prices "are starting to go postal — that's not very popular with the voting public."

3:51 Nukes are the talk; gas is the bridge

• He's a big believer in the nuclear renaissance — and is personally an investor in a couple of (unnamed) small-/micro-reactor companies — but "really for the next few years gas is the only viable solution, and it's cheap."
• US gas trades at a huge discount to the world: Asia (Platts/Japan) and Europe (Dutch TTF) pay $16–20 per MMBTU. Per Goehring & Rozencwajg, US gas is a 90% discount to international prices — "that's just not going to sit. That's just way too big an arbitrage."

4:52 Positioning bearish, Europe complacent

• Nobody is excited: positioning in US natural gas is outright bearish (the red line on his chart).
• Unlike after Ukraine, Europe has let its gas storage run "down and down and down" — "way too complacent."

5:16 20% of global LNG offline — the demand stack on US gas

• Qatar's damaged facilities have ~20% of global LNG offline, likely "for an extensive period" — and it gets very little press.
• The chain: Europe and Asia short LNG → they must take more US LNG → US export terminals under construction add huge demand → plus the data centers — with US gas "still trading in the threes." He thinks people will look back and say: "What was I thinking? How did I not load up on natural gas at that point?"