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 factors contributing to oil losing 10% of its value in the past month, what “contango” means, and how this volatility impacts consumers at the pump.

Transcript:

LAURA SANICOLA: Hi, everyone. I’m Laura Sanicola, author of Barron’s Energy Insider, and I’m here this week with Denton Cinquegrana, chief oil analyst at OPIS. Denton, thanks for joining me.

DENTON CINQUEGRANA: Hey, Laura. How are you today?

SANICOLA: Good. So let’s dive in and talk about oil, which has lost 10% of its value just in the past month. I kinda did a double-take. I knew we were down for the year. It’s had a really volatile, choppy year. But, you know, what’s going on in the past month that’s led oil to this level?

CINQUEGRANA: Yeah. So like you said, oil has gotten beaten up. It’s still above the lows that we saw back in April and May after Liberation Day and, obviously, some concerns about the economy at that time. Not far above it, but still above it nonetheless. And those levels are still in play. But I think we’re starting to see that glut that we’ve been waiting for, you know, really much of the last couple of months for really start to emerge. You have US refineries operating at pretty low rates. This is around the time of year where fall maintenance peaks anyway. So based on the Energy Information Administration data, utilization rates were in the mid-eighties last week, so that’s probably about as low as it could get, maybe a little bit lower during the maintenance season. But suffice it to say, crude oil demand is down, and we’re starting to see some of that glut start to, like, you know, show its face.

SANICOLA: And there’s a word that you use for that in the oil trading world: contango. If you could just explain a little bit about what the market structure is telling us about the way oil markets look right now.

CINQUEGRANA: Yeah. Absolutely. Well, on a short-term basis, we’re still backward dated, which means basically the price today is higher than the price tomorrow. But when you look at it on a one-year basis, so take the November 2026 WTI contract and compare it to November 2025, November 2026 is about 30 cents higher, not a tremendous amount. It’s nothing like we saw back in 2020 when we were in a period of what they referred to as super contango, but it just goes to show how weak that market is right now, how supply seems to be increasing and demand seems to be decreasing. What that tells us right now at least is that next year isn’t gonna be as bad. And I think with these low prices, if they should persist, you’re gonna see a real drop in capital expenditures, and that might come and rear its head, you know, kinda later this decade towards the end of the 2020s and has the potential to usher in higher prices.

SANICOLA: Right. And we are starting to head into earnings season. Some of the oilfield service companies have started reporting, and I figure that’s when we’ll start getting some company commentary on when they actually think that recovery will start to take place. But, you know, I’d be remiss to not mention that all this is pretty good for prices at the pump for American consumers with oil at these levels. Can you put that in context for us?

CINQUEGRANA: Yeah. Absolutely. That’s helped bring and, obviously, seasonality plays a role here in the fall and as the days start to get shorter. But the national average right now is about $3.05/gallon. That’s the lowest level of 2025 to date. I suspect we’re gonna go lower. I think, you know, the president has been talking about $1.99 gasoline or below $2.00. You’re gonna start to see that in a couple places around the country before the end of the year. Maybe not today or tomorrow, but, you know, places like Oklahoma, Texas, some of the southeastern states, you’re probably gonna see some of those levels kinda crop up here between now and the end of the year. Obviously, the national average seems to be on a crash course with a sub-$3.00 average, and that might be coming before the end of this month.

SANICOLA: All right. Well, thanks so much, Denton, and thanks everyone for joining. We’ll see you next week.