Oil prices (BZ-F, CL=F) are experiencing a slight increase amid persisting geopolitical tensions between Ukraine and Russia. Prosper Trading Academy CEO Scott Bauer joins Yahoo Finance Live to discuss the tailwinds he foresees for oil prices in the coming months.
Bauer acknowledges that geopolitical risks have contributed to "a five-dollar premium in the price of crude." He notes that crude has consolidated over the past three to four months, but the ongoing tension between Ukraine and Russia presents "an opportunity" for crude prices to break through the $80 threshold.
Barring "any further escalation," Bauer envisions oil prices reaching a target of $84. However, he highlights that the current economic conditions and pressures on the US dollar are all tailwinds that could drive oil prices even higher. Bauer emphasizes that the next six months will be telling, with several "hot points" arising that could benefit crude prices, including supply and demand dynamics, the US election, and the potential return of demand from China.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Angel Smith
Video Transcript
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MADISON MILLS: Crude oil prices are climbing higher this morning, as we see Ukraine damage Russian oil refineries and a second day of heavy drone attacks. This coming amid reports of falling US crude stockpiles. Meanwhile, OPEC maintaining its 2024 oil demand forecast, expecting it to grow by 2.2 million barrels a day this year.
How are all of these factors going to come together to impact oil prices moving forward? Joining us to discuss in studio, we've got Scott Bauer, Prosper Trading Academy CEO. Scott, thank you so much for being here in studio with us.
SCOTT BAUER: Great being here. Thank you.
MADISON MILLS: We appreciate it. There's no shortage of news that I could have started this interview with this morning, but I'm just going to go with Ukraine because I'm curious whether that is indicative of a trend to come. If we keep seeing these moves from Ukraine to hit these Russian oil refineries, what is the impact that has on the price of oil?
SCOTT BAUER: Yeah. And I really believe that over the last probably year or so, we've had at least a $5 premium in the price of crude just due to geopolitical risk, most of it coming from Russia, Ukraine, and then obviously, Middle East as well. But this has, you know, heightened things a little bit. And then you've got some rhetoric from Putin today, talking about the nuclear arsenal sort of thing.
So I think you have that tailwind for crude, which can happen at any time, and we can see an escalation at any time. And we've seen this consolidation in crude over the last, you know, what is it, three months, four months or so. We've seen, you know, $75, maybe $73 on the low side.
We're pushing up on that upper end, again, right now. And I really think this could be the opportunity that crude is going to break through that $80 number, which is really just a psychological number, but it's a big one because that has been the upper band here. So the geopolitical risk, that is absolutely a major, major tailwind for the price of crude.
SEANA SMITH: If we do see a break above that $80-a-barrel level there, what does that then mean to the upside that we could see further increase?
SCOTT BAUER: I think you're going to see a lot of shorts capitulating and giving in and driving the price up pretty quickly. So I would target $84-ish area without any further escalation in, you know, the geopolitical realm. Again, you've got the $5 in my estimation, but you've also--
You know, we have to look at what's going on with the economy here, what's going on with the US dollar. And quite frankly, recently, the dollar has come off those highs. It's been weakening. And, you know, we saw it strengthen a little bit yesterday, but overall, that trend is to the downside as well, which that gives another tailwind to the price of crude.
MADISON MILLS: And when we think about what's going on here stateside, obviously, we've got that big election coming up--
SCOTT BAUER: Really?
MADISON MILLS: --rearing in the background just a little bit there. How big of an impact does that have on the price of oil this year?
SCOTT BAUER: I mean, it's definitely going to be a bone of contention on both sides. There will be some political fodder on both sides. I would like to think that that's not really going to play into the price of crude.
And I think that, you know, supply and demand, that really is going to set the prices. And the one thing we haven't touched on yet is China. For the longest time, right, we've seen demand destruction really coming out of China because their economy is just not recovering.
If that starts to turn around at all, which I think it may-- and I've been very bearish on China for a long time, and I see it maybe turning around a little bit-- that also is going to be a tailwind for crude here. So over the next, you know, six months leading into the election, we have so many hot points that can really, you know, change the price of crude in a heartbeat.
I would watch that break of $80 up to $84 or so. And I think that we see a bottom-- a near-term bottom for a while here probably right around $75 or so, which, you know, a lot of people aren't going to be happy with that.
