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 news of Iran opening the Strait of Hormuz for ten days during a ceasefire between Israel and Hezbollah.

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.

DENTON CINQUEGRANA: Hi, Laura. How are you?

SANICOLA: Pretty good. All things considered, and everybody should note that we’re filming this as of Friday, April seventeenth at a little before ten AM where the latest news is that, you know, Iran said it would open the Strait of Hormuz for a ten day period where there’s a ceasefire between Israel and Hezbollah and Lebanon. Markets are down pretty significantly on this news. It seems like everyone’s hoping that this will open the doors for a wider peace deal, notably the US naval blockade is still in place in Iran. So a lot of mixed messaging going on, but, you know, the mark market’s been weaker all this week as traders seem to really be hoping that there’s gonna be progress here. What do you think, Dunton?

CINQUEGRANA: Yeah. I think this was “give peace a chance week”, in the oil markets. Obviously, the trend has been pointing lower throughout the week. WTI and Brent, WTI’s been in the low eighties now.

Brent hovering just below ninety. Again, it’s a little after nine thirty this Friday morning, so we should time stamp everything today. Yeah. But, again, this is the market saying, okay.

Maybe cooler heads are gonna prevail. We have we’re this you know, we’re this close to a peace deal. Let’s get it over the goal line. But it’s also probably shaking out some of the nervous length.

I mean, I think you mentioned it, but there’s still a real disconnect between the futures market and the physicals markets, which are still, you know, kind of well over a hundred dollars, and that’s the price that refiners are paying for this oil.

SANICOLA: Right. So it’s a little bit hard to ascertain where we are even though the physical price has come down a bit in the past week. You know, it’s pretty unprecedented to have this gap. Would you say that’s accurate?

CINQUEGRANA: Yeah. It’s usually unusual to be sure, but it just goes to show the fact that, hey. The paper market’s a paper market, and the physical market is where the rubber meets the road, essentially.

It doesn’t happen very often, and this is one of the again, we’ve been using the phrase unprecedented for this a lot. So let’s call this one unprecedented as well.

SANICOLA: And I will note also, this is sort of in line with what some banks and other consultancies were forecasting. When I was at CERAWeek last month, a lot of folks were saying something needs to happen by April, some sort of resolution, because that’s when things really start to break. You know?

And we’re seeing demand destruction. That’s what I mean when I say things break. We’ve seen so much of it in Asia, you know, so much, you know, curtailment of oil use that I think doesn’t get as much attention in the media. And, you know, I was reading JPMorgan says that, that’s been the case in Europe to some extent as well, and that’s pressured prices somewhat.

Obviously, Europe and and the larger world still has a products issue. Right? Still despite everything going on. Tell me a little bit.

CINQUEGRANA: Absolutely. And, even with the market falling like it is and the strait being open, you know, this doesn’t just you it’s not like flipping a light switch and everything goes back to normal. This is gonna take some time. Jet fuel, as we all know and as we’ve seen the headlines over the last, you know, twenty-four, forty-eight hours, European jet fuel is a real issue, and it’s going to continue to be probably for the next, you know, probably month or two.

Now, let’s just speculate that this does lead to a wider peace deal and the strait stays open for the foreseeable future. You’re looking at probably a good, you know, eight to twelve weeks before things kinda normalize, before traffic normalizes in the straight, before refiners in the Persian Gulf get back up and running, producers, etcetera, and some of those barrels start to move as well. So it’s gonna take some time. You gotta preach patience on something like this.

That’s for sure.

SANICOLA: Right. And I guess it should also be noted, you know, oil right now between eighty and ninety. When we started the year, it was between fifty five and sixty five. So we’re still a long way from where we started. But thanks so much for joining me, Denton, as always, and thanks everybody else also for joining. We’ll see you next week.