Barron’s Energy Insider | In Partnership with OPIS | Video – December 9, 2024

Transcript:

LAURA SANICOLA: Hi. I’m Laura Sanicola, author of Barron’s Energy Insider newsletter. And joining me this week is my colleague, Denton Cinquegrana, chief oil analyst at OPIS. Denton, thanks as always for talking with me.

DENTON CINQUEGRANA: No problem. Good to see you, Laura.

SANICOLA: Yeah. So let’s talk OPEC. I mean, oil companies really can’t catch a break here. OPEC plus was supposed to start ramping up production in October, then delayed to December, and now they are pushing out, unwinding those voluntary cuts back to the start of April of next year. How bearish is this for oil?

CINQUEGRANA: Yeah. Well, like you mentioned, the previous meetings is like, okay, we’ll delay this one month. We’ll delay this one month. Now we’re going for a full quarter here. The market treated it bearish. Probably, the prices dipped a little bit, not too much from here. But, again, this is also the time of year when oil tends to bottom out. We usually see a fourth quarter low, usually in early to mid-December, and then we rally usually into the first and second quarter. So I think OPEC is probably trying to time that rally a little bit as well. It’s also an acknowledgment by them that maybe demand isn’t as good as they thought it might be by this time.

SANICOLA: Yeah. At Barron’s, we’ve been looking for any upside for oil producers or refiners here this week in the newsletter. We’re honing in on Exxon since they have their investor day this week. This is a company that’s adding refining capacity in chemicals and specialty products over the next couple of years even in this weak environment. But they say it should, be able to turn a healthy profit during mid-commodity cycle. So I I guess that’s my question for you. Are we at mid cycle? Are we near it? What do you think of Exxon’s strategy here?

CINQUEGRANA: Yeah. I think we’re pretty close to mid-cycle, maybe a little bit below. If you look at the NYMEX gasoline crack spread, for example, so far in December, it’s been averaging about thirteen dollars a barrel. That’s very similar to December of last year. So we’re kind of, I think, right about there. Diesel, whole another story. Last year at this time, we’re looking at forty dollar cracks. Now it’s, you know, 23, 24, 25 dollars a barrel.

But as far as Exxon’s concerned with the specialty products, the good thing about those is, yeah, they’re low volume, but they’re very, very high margin. So if you’re selling those specialty products, you’re probably doing well with profitability. But as far as, you know, the key marquee products — gasoline, diesel, jet fuel — it’s hard to see much upside for refiners right now. I guess the real upside is that in 2025, you do have three refineries closing, two in the United States and one in the UK. Obviously, that that eliminates some, you know, quote, unquote competition. But right now, you know, here in in early December, ahead of the holidays, it just doesn’t look all that great for for refiners right now.

SANICOLA: Alright. Thanks so much, Denton, and we’ll see you all next week.

CINQUEGRANA: Anytime. Sounds good.