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Oil (CL=F, BZ=F) prices are expected to dip to the low $60-per-barrel range, similar to levels seen in 2021, as oversupply continues to plague the market.
Macquarie Group global energy strategist Vikas Dwivedi joins Asking for Trend host Josh Lipton to discuss how geopolitical events, tariffs, and sanctions are shaping the oil market.
To watch more expert insights and analysis on the latest market action, check out more Asking for a Trend here.
you have clients, they’re asking you, listen, where oil is today, where it is 12 months from now, what are you telling them?
Yeah. Look, uh what we tell them is that, um you, there’s no way to avoid the geopolitical, um events that are, you know, uh hitting the market from every direction, whether it’s, um, you know, Venezuela and Iran and Russia oil potentially being taken off the market, uh obviously, that would make things more bullish, uh or demand getting hit from a potential trade war, and if not a trade war, then just tariffs, uh, you know, hurting demand. So, uh those items are all so big that they’re dominating, uh the discussions in oil. Where we think it is right now, look, we, we don’t think it’s that far off of fair value right this minute given the uncertainties about, uh, some of the areas that could get their oil supply reduced, or exports reduced in, you know, Russia’s case. But, um you know, would you think to your initial comment, uh as time goes on this year, and especially next year, we’re just in a world of far too much oil supply. Uh, there’s just no way to get around that, uh, unless OPEC cuts even more, right? And I don’t think they want to cut more than they’ve already cut. I think they would, but not much.
So, is it Vikas, is it fair to say because you write about and the kind of dynamics you put it like this, it’s a tug of war, you say, between sanctions and tariffs. Is that how investors should think of it?
Yeah. Yeah. Look, depending on how big the sanction, sorry, the tariffs end up becoming, it could materially hurt oil demand, you know. They could, they could reduce oil demand growth by 25 or even 50% of the roughly 1.2 million barrels a day that we expect to grow this year. So, I, you know, obviously that would hurt prices, uh, in a meaningful way. But in a situation where, um, a significant amount of Russian barrels are taken off the market and, uh, Iran as well, you know, you could end up losing as much as 3 million barrels a day of demand, uh, I’m sorry, of, of, uh supply from just those two countries. Add in a little bit of Venezuela, and you get over 3 million of supply loss, that would take the market up to extremely high levels. And I don’t think that’s something, you know, the Trump administration wants to add on to all the economic uncertainty, you know, they’re dealing with right now.
