OPIS Insights

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

This week’s episode examines the continued strain to global oil prices as the massive supply disruptions caused by the closure of the Strait of Hormuz continue.

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. We have had a very tumultuous week, obviously, and in a state of play where still not seeing a lot of ships moving through this Strait of Hormuz, which seems to surprise some folks in the White House. But does it surprise you, and why or why not?

CINQUEGRANA:  No. It doesn’t. It’s not a surprise. And, you know, I guess you could describe the traffic flowing through right now as basically a trickle.

A couple of boats here and there get through and get out. Obviously, there’s the issue with the tolls being paid to Iran, tolls for lack of a better term. But it’s clearly not enough to really calm the markets down. You still see futures trading around a hundred dollars, not quite there or either side of it, but it’s the physical markets that are really kind of showing the strength.

There’s just not many sellers out there who are willing to go out on a limb. One, especially with Middle Eastern crude, are you gonna get be able to get it out?

So you’re still seeing, yes, Futures have dropped.

Prices are around a hundred dollars, but you’re seeing some pretty hefty premiums for the various grades of crude oil. And even some in the United States as some buyers who have seen their crude oil cut off because of the closure of the Strait paying some real desperation prices.

SANICOLA: And so what does this mean for US refiners? Because, obviously, there is a lot of refined products offline globally, whether it’s that they can’t get out of the Strait or I did I remember the Saudis detailed some damage to major facilities.

You know? So all of that usually is, you know, spells good things for US refining margins, but, you know, what’s the state of play here for them?

CINQUEGRANA: Yeah. So if you look at it on the future screen, yes, refining margins have come in a little bit. They’re still pretty strong, but their their their recruit costs are are actually going up as as there’s more buyers jumping in to grab any sort of barrels they can get their hands on, particularly in places like Asia. So you are seeing a little bit of downtrend, but with that being said, US refiners, particularly on the Gulf Coast, have a real advantage versus others.

They have that export outlet, we’re seeing exports the latest EEIA data for the week ending April third showed four hundred and twenty two or four hundred forty two exports of jet fuel. That’s a record. It’s the highest jet fuel export. And I maybe we don’t see that again this week coming up, but we’re probably still gonna be in that same territory as Europe is really kinda desperate for jet fuel right now.

SANICOLA: And not yet seeing major signs of demand destruction from Europe and from the US. I know that in the latest inflation numbers showed that, you know, pain at the pump is contributing to inflation or did last month. But in terms of the overall supply-demand balances, what do you think?

CINQUEGRANA: Yeah. I think we are starting to see a little bit of gasoline demand destruction here in the United States more specifically. So OPIS has data from volume data from about forty thousand stations throughout the United States.

Yep. Depending on what number you look at, say, there’s about a hundred and twenty five, hundred and thirty thousand stations in the United States that sell gasoline. So March twenty twenty six versus March twenty twenty five was down five and a half percent. Now granted, we have been trending lower year on year for the various months, but it’s been either side of three percent. So you can make an argument that, you know, you’re losing about two and a half to two and a half percent gasoline demand as a result of the higher prices. Now the longer the price stays elevated or or over four dollars a gallon, that that’s when you run the risk of more demand destruction.

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