OPIS Insights

Barron’s Senior Energy Writer Laura Sanicola and OPIS Chief Oil Analyst Denton Cinquegrana discuss what’s ahead for oil this week.

Watch this week’s episode for insights into the oil supply surplus forecast, the reason for oil’s strength, and the drop in gasoline inventories in the United States.

Transcript:

LAURA SANICOLA: Hi, everyone. This is Laura Sanicola, author of Barron’s Energy Insider, and I’m here today with Denton Cinquegrana, chief oil analyst at OPIS. Denton, thanks for joining me.

DENTON CINQUEGRANA: Hey, Laura. How are you?

SANICOLA: Good. So let’s talk oil. You know, it’s finally the end of summer, the end of the strongest oil demand season of the year, and markets are shaping up to be a little bit tighter than expected. What is behind some of that strength? And, you know, I should say it’s not that strong. You know, we’re still range bound in the mid-sixties, but given the supply surplus forecast, I think many people thought prices would be a little softer. What’s going on?

CINQUEGRANA: Yeah. Mid- to low- to mid sixties right now. We’re only a couple days into September, so a lot can change, obviously, between now and the end of the month. But I think some of that surplus, that oil global surplus hasn’t quite yet materialized the way it was anticipated. So the timeline’s getting moved out maybe to, like, the fourth quarter or late in the third quarter, which, again, we are getting late into the third quarter, but, you know, getting pushed out a little bit later into the year.

Refined products, you know, with the start of the September, have been pretty strong. Part of the reason for oil’s strength, at least domestically, or at least holding on, I should say, domestically, is that refiners have been running at a pretty high rate. Now, granted, over the next several weeks, they’ll start to go into full maintenance, so that’ll really kinda dig into crude oil demand. But refinery runs have been relatively strong.

Turning to the refined product side, gasoline inventories in the United States, according to the EIA, have dropped in each of the past seven weeks. So I think that’s keeping gasoline a little bit elevated. We’re kinda running just a little bit below the five year average, but not drastically so. And, again, like you mentioned, the summer driving season’s over, so we should start to see some lower weekly demand estimates from the EIA as well.

But, you know, gasoline inventory is dropping. At Ford, it’s still pretty strong. So there is demand for for US molecules. That’s that’s for sure.

Diesel, we’re still at a deficit to the five year average, and we are moving into that time of year where, you know, in the Midwest, you have the harvest coming up over the next several weeks and and then into October, etcetera.

And then, obviously, heating season comes around. So, you know, a little bit of a potentially strong suit certainly seasonally for diesel. Gasoline seems like it’s holding on a little bit longer than you might anticipate.

SANICOLA: Alright. Thanks so much for breaking it down, and thanks everyone for joining. We’ll see you next week.