Oil prices (CL=F, BZ=F) are staging a rebound following OPEC+'s announcement to extend production cuts into 2025. To provide insights into the outlook on oil prices, Path Trading Partners Co-Founder and Chief Market Strategist Bob Iaccino joins Market Domination.

Iaccino acknowledges that the OPEC+ production cuts represent "the first sort of indication of more production." However, he notes that the demand picture appears "a little shaky." Despite the summer gas and travel season "getting off to a good start," Iaccino highlights concerning factors such as a jet fuel shortage in Japan and declining US rig numbers.

"We've been in a downward-sloping channel... since about April, let's call it mid-April, and we haven't broken out in either direction," Iaccino explains. "And the thing is, when you stay inside these channels, even if you continue to respect the upper and lower bounds of the channel, price heads lower."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Angel Smit

Video Transcript

Let's check on oil prices right now.

We have seen them edging higher and making up for some of the declines from last week and rising 3% yesterday.

Actually, this all coming after OPEC stuck to its demand forecast.

Joining us now, Bob, you know, co founder and chief market strategist at Path Trading Partners and co portfolio manager, the stock think tank.

Thanks for so much for being here, Bob.

So as we look at oil prices and as we saw OPEC stick to its guns here, sort of contextualize this, this for us.

What's the significance of them not changing the forecast?

Well, first of all, Prince Abdulaziz said a couple of days ago when the market started to head a little bit higher off of this and then turn back lower that give it a few days the market will get what they were trying to say.

And it seems to me what they were trying to say was, yeah, we're willing to get rid of the voluntary production cuts in part because those production cuts are voluntary anyway.

And a lot of these countries specifically Iraq and some of the African producing nations weren't really sticking to the voluntary section of the production cuts, but they didn't say they would do it.

You know, a lot of oil analysts were saying this is the first sort of uh indication we've seen of more production and prices went lower.

But what we're seeing on the other side of it is the demand side might be a little shaky in terms of those sort of level demand that we've had lately, the summer driving season seems to be getting off to a pretty good start.

You're seeing that in the consumer data as well as a little bit of the travel data.

And also we have jet fuel shortages starting in Japan.

And if they were to get more jet fuel made, that would be taking crude oil away from other distillates, which means they need more crude oil, at least going into Japan, not a giant part of sort of supply absorption, but it would matter.

They'd either have to export more or disappoint the market which would increase the price of travel by air and increase the usage of people's cars for travel during the summer driving season.

There's a lot of moving parts here, but I think probably the most important one, Julie, to be honest is the US rig cons have been going down basically since February of 2022.

And this past Friday, we have the lowest number since January of 2022.

That's not really a good sign for supply.

So, Bob bottom line for you, then you, I'm looking at oil here.

It's trading just under 78.

Where do you think we are, Bob?

And, you know, three months from now, six months from now?

Well, that's a tough question, Josh, and I'll tell you why we've been in a downward sloping channel that you can see on the chart you just put up since about April.

Let's call it mid April And we haven't broken out in either direction.

And the thing is when you stay inside these channels, even if you continue to respect the upper and lower bounds of the channel price heads lower.

Uh The market tried to break out a little bit a few days ago and actually did end up closing above the upper side of that channel, but then broke back into it, reached down to the bottom and now we're back up toward the top of it.

Even if we break out now, we're about $3 lower than the breakout from a few days ago.

And there's still some significant problems getting through to the upside.

So if you ask me six months for now, we're probably a little bit higher in crude oil.

Remember, we still in theory need to refill the S pr so that puts a little bit of a floor in it.

But it's tough to say because it very economically dependent in terms of the data.

Does the data get better?

Does it continue to get stronger in the US and have that leak all over the globe or does it just kind of stay stagnant?

And the Fed doesn't have to do anything that would basically mean slightly lower prices.

Well, I wanna ask you specifically about the read through to gasoline prices as well because AAA, what put the national average at $3.44 as of Monday, which is down, um, the biggest, actually week, over week drop that we've seen thus far this year.

Does that last for the summer that we continue to see some relief on, on gasoline prices?

Probably not because obviously with the crude oil, I don't want to call it a glut.

We're oversupplied.

You could tell that in the price.

All right, that's something that's very good about people who are actively investing this crude in crude oil is it is a pure supply and demand market.

It really is.

You don't have to worry about ceo scam or gap earnings or any of that.

It's how much oil is out there and how much oil are, are people buying?

What's the demand like?

And right now the supply has been exceeding the demand despite the OPEC cuts and those OPEC cuts are almost two years old now and they're remaining in place.

So I would say that it probably doesn't last through the summer because there's a lot of moving parts like I mentioned, uh, airline travel may spike up a little bit and you could get, of course, geopolitical surprises.

So if you ask me by the end of summer, I'd say we're probably a little bit higher at the pump than we are right now.

Bob, always appreciate you taking the time to chat.

Thank you so much.

Good to see you.