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 impact of the government shutdown ending on oil traders’ access to key data like the CFTC’s commitments of traders report, the IEA’s and OPEC’s narrowing demand forecasts, and the strategic production plans of oil majors like Chevron.

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: Hi, Laura. How are you?

SANICOLA: Good. So with the government shutdown finally ended, oil traders who’ve been really operating in the dark on certain key data that they use to kind of determine positioning are finally gonna start getting some more data going forward. You know, we’re kinda flat to end the week on oil, but, again, it’s kinda tough to trade it when you don’t have all the data that you need. Can you give us an understanding of, what I’m talking about?

CINQUEGRANA: Yeah. Sure. Well, the good thing is during this whole shutdown, we had the supply and demand data from the Energy Information Administration. But what we were missing, and we may have talked about this before, but data from the Commodity Futures Trading Commission, this gives us a good idea of the positioning of hedge funds and producers, etcetera. Now granted for the Brent contract and through the ICE, you were able to see commitments of traders report, but, again, that’s only half the picture. So now as the government reopens, that should start to, you know, kinda catch up on the CFTC side. So that’ll give us a good idea of how hedge funds, etcetera, and the speculators in the market are positioning themselves.

SANICOLA: And there hasn’t been as much money chasing oil in the past year considering a lot of the activity has been in commodities like gold and in big mag seven stocks. But, you know, we are expected to kind of stay at these levels or or maybe even fall a little. Right? We we have some demand forecasts and some new Brent forecasts, you know, trickling down.

CINQUEGRANA: Yeah. One of the things that caught my attention this week was the International Energy Agency kinda boosting their demand forecast for 2025 and 2026. They’re still the lowest as demand growth is concerned, and it’s still below kinda historical levels. But that spread between, say, them and OPEC who has the largest demand forecast growth, it’s starting to narrow a little bit. But price expectations for for 2026 are still relatively low. For example, the Energy Information Administration is forecasting Brent for 2026 at 55 dollars a barrel. That’s six, seven dollars below where we are right now.

But that forecast has been raised by about three dollars from the last short term energy outlook, and I think it’s a little bit more of, hey, this lot of oil that we’ve been expecting, it may not emerge because demand might be a little bit better than we expected. We still have the Russian sanctions, drone strikes, things like that, and obviously geopolitical tensions that are just kind of hanging over the market’s head.

SANICOLA: Something that caught my eye this week was at Chevron’s Investor Day, they announced plans to increase production. The big oil majors are all increasing, but is it fair to say, you know, they’ve got low enough breakevens in their key regions that even if oil falls a little bit from this, you know, sixty, fifty nine level right now, they’ll still be in a good spot.

CINQUEGRANA: Yeah. They’re amongst the handful that are considered best in class when it comes to pulling oil out of the ground in places like West Texas, in the Permian Basin and other places. But, also, you know, obviously, you have long lead times and huge upfront investments in in deepwater Gulf of Mexico production, but the cost per barrel are are pretty low there. But, those are projects that take seven, eight, nine years for the first drop of oil to come to the market, whereas the lead time in shale oil is a lot shorter.

SANICOLA: Right. All right. Well, thanks Denton for joining me, and thanks everybody else. We’ll see you next week.