Watch: Barron’s Senior Energy Writer Laura Sanicola and OPIS Chief Oil Analyst Denton Cinquegrana discuss what’s ahead for oil this week.

Transcript:

LAURA SANICOLA: Hi, everyone. I’m Laura Sanicola, author of Barron’s Energy Insider. And joining me again this week is Denton Cinquegrana, chief oil analyst at OPIS. Denton, thanks so much for being with me today.

DENTON CINQUEGRANA: Thanks, Laura. Good to be here again.

SANICOLA: Well, Trump’s tweets and commentary have once again reentered the energy market dynamics. President Trump has called for OPEC to lower oil prices during his address at the World Economic Forum in Davos. Denton, how is the market responding? I know it fell a little less than a dollar today on that. You know, can OPEC do this, and how is the market expected to respond longer term?

CINQUEGRANA: Yeah. If you like volatility, you’ve come to the right place. That’s for sure. But we’ve seen this this movie before. He says something; the market reacts. Earlier today, right before his comments to the World Economic Forum, prices were a little bit higher for oil, 35, 40 cents. Now oil has been down for the past four days, so it was kinda looking to kinda stop that downward streak. The minute he started talking and mentioning OPEC, prices dropped by about a dollar. So his comments always get a lot of attention, especially when it comes to oil. But, you know, oil is not the only thing. You know? A lot of other asset classes respond to things he says. But long term, these things normally don’t you know, it doesn’t grip the market so much. It’s very short-term. It probably shakes out a little bit of people and spooks some people in the market. But for the most part, it doesn’t have a really long-term impact.

As far as the effect, I think with his comment of OPEC lowering prices, if I could kind of maybe try and put words in his mouth, I think what he’s trying to say here is, like, OPEC increased production and that will lower prices. I think that’s what he was trying to to get at. As we all know, OPEC+ has been, reduced capacity, over the past couple of years. They have a lot of spare capacity sitting on the sidelines. And if they did start to bring oil back to the market, prices would certainly decline or at least at the very least be capped.

SANICOLA: Right. And and as we know, they’ve been putting off reintroducing that oil into the market because of their demand projection. So, you know, what you might you might reasonably think here is, well, President Trump is saying, I know your own demand projections look weak, but I feel that prices are too high and should be lower. And, you know, I guess the question there is, does OPEC have incentive to increase production and regain some of that lost market share on Trump’s timeline or their own?

CINQUEGRANA: Well, I think that’s exactly it. There are probably a few of them are sick of losing market share to countries like the United States. The US has become a a more significant exporter of oil over the last several years. This has been happening for this since about 2018, 2019. But, you know, as OPEC does not produce, that means it’s an opportunity for countries like the United States, Canada, Brazil, other non OPEC nations that have been seeing increased production over the past year year or two.

SANICOLA: A few other comments president Trump has recently made about, oil and sanctions. He said he would add new tariffs and sanctions against Russia if the country does not make a deal to end the war in Ukraine And, also said that the US doesn’t really need Canadian oil, which is subject to about a 25 percent, tariff, next month unless a carve out is made and there isn’t broadly consensus that there will be one. How is market responding to that? How are you responding to that? Obviously, that creates a lot of volatility here.

CINQUEGRANA: Yeah. It creates a lot of volatility. I think, you know, again, the whole we don’t need Canadian oil, nothing can be further from the truth. The heavy Canadian crude oil that the US refiners process is is pretty key to their profitability, particularly in the Chicago area, the Gulf Coast, and really, all of PADD 2, which is basically the Midwest as a whole. A lot of those refineries run heavy Canadian crude, BP, Exxon, Citgo, all those three refineries in the Chicago area, Flint Hills in Minnesota. So that’s just a few of them. It’s it’s a pretty important piece, so I’m surprised there’s no, I’m not necessarily surprised that there’s no carve out for it, but it really is important. Those refineries can maybe substitute some domestic light sweet crude, but you’re still not gonna get the same kind of bang for your buck.

Their other option, which would not be good, is reduce run rates. In the middle of the winter, that that could be fine. You don’t have to produce as much gasoline. But once we get into the summer driving season and you’re reducing run rates to, you know, to make up for the fact that the Canadian oil has gotten more expensive and you can’t find easily find a substitution, you’re gonna run into some problems with gas prices.

SANICOLA: Remind me, Denton, which refiners again would be most impacted, if a twenty five percent tariff was implemented, and, how much pain would they experience compared to the pain of Canadian oil producers?

CINQUEGRANA: Yeah. I think the ones in the Chicago area. So that’s BP’s Whiting Refinery in Indiana, ExxonMobil’s Joliet Refinery in Illinois, and Citgo’s Lamont refinery, in Lamont, Illinois. Those are the ones that come to mind right away. The Canadian producer is certainly gonna feel some pain on this as well, but you’re looking at these refiners who will have a higher acquisition cost of that that crude oil. Now who pays that 25 percent remains to be seen, but, again, it’s gonna be it’s gonna be tough to get around.

SANICOLA: Alright. Thanks so much, Denton, and thanks, everybody. We’ll see you next week.