Watch: Barron’s Senior Energy Writer Laura Sanicola and OPIS Global Head of Energy Analysis Tom Kloza discuss what’s ahead for energy this week.

Transcript:

LAURA SANICOLA: Hi, everyone. This is Laura Sanicola, author of Barron’s Energy Insider, and I’m here for our last video of 2024 with my colleague, Tom Kloza, Global Head of Energy Analysis at OPIS. Tom, thanks so much for being here. It’s a bit of a recap and also, looking ahead to the new year. I wanna start with your specialty, which is refiners.

So much went wrong for them in 2024. Maybe you could talk to us about what happened and how they’re positioned going into the new year.

TOM KLOZA: Well, I think, about a month from now and for the next ten days thereafter, you’re gonna see a horror show of earnings, probably quite a few losses. If you’re an independent refinery, the fourth quarter of 2024 was just ugly.

Still, having said that, you know, refiners tend to recover, and margins tend to recover for gasoline and diesel when you get into that sort of February to April period. So they may come back a little bit. I would submit that we probably have one or two too many refineries, particularly in the mid-continent, and you may see some more closures in addition to the Lyondell two hundred and fifty thousand barrel-a-day Houston refinery that’ll begin shutting down next month.

SANICOLA: A lot of the problematic areas seem to be on the West Coast. Pretty much every independent refiner has some exposure to the West Coast. Why is the West Coast performing so poorly, and is there anyone most at risk?

KLOZA: Well, the West Coast probably sees more demand destruction or deterioration than any other section of the country. We think that we may lose another California or one Washington refinery in 2025. You know the regulators have set up a system where they want to impose maximum margins for things like gasoline. And quite frankly, we’ve been in the bottom quartile or the bottom ten percent of margins for gasoline for the last few years there.

SANICOLA: In the newsletter this week, we make a number of predictions about where oil is headed in 2025, and you’ve spoken with me at length about this before. We may see a choppy January, but, for the most part, oil should be well supplied into the year. What does that mean for the different parts of the complex?

KLOZA: Right now, I would say it means that 2025 is gonna be extremely front-end loaded, which is to say that, you know, the outright prices are tough to predict, but I would submit that you would see the highest prices for WTI and Brent in the first four months of the year with, the possibility of seeing much, much dramatically lower prices toward the end of the year. That looks possible. And one of the reasons is we’ve got a very strange market where inventories are tied up front because people have this bearish outlook about crude oil. And yet, when you look at forward prices, they’re very depressed because of the large amount of unused capacity.

So it’s gonna be a real volatile year. We we we’re calling it the circus of uncertainty for next year. And, you know, that’s that’s exciting, but may not be necessarily a good thing for crude oil producers.

SANICOLA: Right. Well, it’s always a bit of folly to try and predict what’s gonna happen with commodities if the past five years have taught us anything. A global pandemic, a war in Eastern Europe, all of that could come out of the blue and shake things up, but looks like we’re headed for a really interesting new year in the energy sector. So thanks so much, Tom, and we’ll see everybody else next year. Have a happy holiday.