OPIS Insights

Watch: Barron’s Managing Editor Daren Fonda and OPIS Chief Oil Analyst Denton Cinquegrana discuss what’s ahead for oil this week.

Watch this week’s episode for insights into the affect on crude oil in the aftermath of the air strikes in the Middle East as well as where gasoline and diesel prices might end up this summer.

Transcript:

DAREN FONDA: Hi. I’m Daren Fonda, managing editor at Barron’s, and I’m here with Denton Cinquegrana, chief oil analyst at OPIS. How are you, Denton?

DENTON CINQUEGRANA: Hey, Daren. Good to see you again.

FONDA: Great. So, let’s talk a little bit about the wild and crazy week that oil has had with the flare up in the Middle East, the rapid peace, or ceasefire rather, that took hold, and oil prices going right back to where they were before all this started. Can you put that into a little bit of context and give us a sense of where you think oil is heading next?

CINQUEGRANA: Absolutely. So, yes, as you mentioned, we had the air strikes, US on Iran, last week. Then the, I guess, symbolic more or less, retaliation from Iran, which actually the market viewed it as more of a de-escalation than probably even the ceasefire, which obviously added even more to it. But like you mentioned, prices are back to where they were beforehand as that geopolitical premium kinda gets worked down.

But at the end of the day, there was no production that was impacted as a result of the missiles flying back and forth between Israel and Iran and and obviously the US air strikes as well. So to me, I feel like without any other further escalation, the next step is down. You still have OPEC+ bringing bringing battles to market. In fact, that little spike that we had up to the high mid and high seventies for WTI and Brent probably allowed some producers to hedge and sell into that rally.

So perhaps some of those companies that were considering taking rigs offline, well, like, well, you know what? We’re still twelve dollars up, so maybe we don’t have to take those rigs offline now. US production is still over thirteen million barrels a day or so. So, yeah, I think the next step is barring anything unforeseen is down.

FONDA: So WTI is back in, like, around sixty five. Brent is a little bit higher as it always is. Do you see much of a price movement over the next month, and where do you think, those prices will end up, by the end?

CINQUEGRANA: Yeah. I think over the next month well, one thing to consider is we are now in hurricane season. We’ve already seen a couple storms develop, nothing major yet. But that first one that kinda goes into the Gulf of Mexico or is aimed at the Gulf of Mexico, I think that and July may be a little bit too early, but that has the potential to send some markets up. OPEC is already committed to increasing in July. So, yeah, I think we could probably be ending, July about a month or so from now, at lower levels. Probably, you know, not too too drastically lower, but, you know, low sixties for WTI, probably about sixty five, sixty six for Brent.

FONDA: Okay. So what what does this mean for gasoline, and what does this mean for refiners?

CINQUEGRANA: Yeah. Hopefully, it gives refiners a little bit more wiggle room on on refining margins. I was just looking at how June goes into July, the end of the second quarter into the third quarter. Typically, with the exception of one year, July crack spreads on the NYMEX, could just comparing WTI to gasoline. July tends to be a better month than June with the exception of 2022, but July 2022 was a thirty five dollar crack spread. So I’m sure refiners would welcome a thirty five dollar crack spread these days when it’s around twenty one, twenty two dollars a barrel.

FONDA: Yeah. So it’s pretty good for the refiners. What’s the impact on diesel in particular?

CINQUEGRANA: Yeah. Diesel’s been actually been very strong, actually stronger than gasoline right now in the futures market. Diesel’s twenty five, almost thirty cents higher than gasoline right now. And then we see that in all the US spot markets as well where diesel has a pretty significant premium to all those gasoline markets. So right now, if you’re a refiner, you’re focusing on making diesel, jet fuel, those those products that are bringing a higher return right now.

FONDA: Great. Well, thank you so much, Denton. Appreciate it.

CINQUEGRANA: Anytime. Great to see you.