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 markets’ reaction to the current state of oil markets amid ongoing Middle East tensions.

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: Thanks, Laura. How are you?

SANICOLA: Good. So let’s talk about oil. You know, we’re a lot of information, you know, from the government, from consultancy services who track this about inventories drawing down to what are unsustainable levels.

And in some sense, we’ve had this conversation since the crisis started. But how low exactly are they? Can you help me contextualize, you know, where we’re at right now and, you know, maybe a read through about why oil prices are not currently higher?

CINQUEGRANA: Yeah. So, again, it’s one of those things. Yes. We’ve drawn down spectacularly. However, that being said, commercial inventories in the US of crude oil are only about three million barrels behind where they were at this time last year.

So, again, last year, considering how comfortable supply was, that’s probably a pretty good sign. But, also, we’ve had the IEA coordinated release of four hundred million barrels announced back in March, I believe it was seventeenth. So far and the United States has committed a hundred and seventy two million barrels to that.

So far, we’ve only released fifty eight million barrels. So there’s still more than a hundred million barrels coming from the United States based on the commitments from the for the IEA release. So, again, I think, you know, yes, we’ll at some point, if the strait remains closed and and issues continue in the Persian Gulf, we’ll reach that point eventually, but it may not be as soon as some may be saying.

SANICOLA: Right. Obviously, we’ve got a lack of buying from China, which we’ve talked about in past months.

CINQUEGRANA: That’s been a big help. Yeah. Exactly. I think their imports are down, like, fifty percent from from, say, February before the before the conflict started. So them by being less of a buyer has also kinda helped, you know, keep some some balance within the supply.

SANICOLA: And so then help me understand why the stocks of oil refiners like Marathon Valero hit fresh all time highs last week. Obviously, they make money turning crude into refined products, gasoline, jet fuel, diesel, and and doing so at the biggest margins they can. Why are they hitting all time highs?

CINQUEGRANA: Yeah. So refining margins still remain pretty strong. There are granted some headwinds. We are seeing a little bit of decline in gasoline demand due to the high prices with the national average at about four and a quarter right now.

Obviously, that’s about thirty cents below where it was not that long ago. So I think Americans see that and say, oh, maybe the worst is behind us as far as retail gasoline prices are concerned. That being said, refining margin’s still pretty strong. And then you also have you know, inventories are kinda low.

This week, we did see gasoline inventories kinda perk up a little bit. That’s probably because refineries are running at high rates. About ninety five percent of capacity in the United States, that’s a really strong rate, especially for this time of year. You probably can’t squeeze out much more than ninety five percent.

You probably get up to about ninety six percent of capacity, but that’s good. That’s gonna be tough.

But gasoline inventories have been declining. Last week’s build was was a a step in the right direction because it was starting to get a little tight on gasoline supply. Now not yet a panic, but it was starting to get get a little bit concerning. But, hopefully, there’s more builds to to be had here over the next couple weeks, and and gasoline supplies kinda get back on track with where they might normally be at this time of year. But for now, it looks like retail gasoline prices are in a kind of flat to lower pattern. We’ll see if that continues to hold because crude oil seems to be stuck in the kinda low to mid nineties. Probably a good thing, but we’re down, you know, a good ten, fifteen dollars from the from levels of just two weeks ago.

SANICOLA: Right. Okay. Well, thanks so much for contextualizing, and thanks everyone for joining us. We’ll see you next time.