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 continued divergence between oil prices and equities driven by OPEC+ production decisions and demand concerns, the surprisingly resilient refining margins supported by potentially tightening gasoline supplies despite broader demand questions, and the potential for a limited oil price relief rally contingent on OPEC+ actions and economic indicators like port activity.

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 being here today.

DENTON CINQUEGRANA: Hey, Laura. Good to see you again.

SANICOLA: So last week, we talked about how oil futures and equities were starting to diverge with equities rallying and oil trending lower and that was really the case last week. We now have oil trading, kinda in the fifties, high fifties range, whereas, most US equities have kind of eliminated their Liberation Day losses. So what’s driving that dynamic now, and is it the same thing that was driving it earlier?

CINQUEGRANA: Yeah. It’s a lot of the same thing. OPEC+ is kinda dictating they meet this week, and it’s a will they or won’t they? Will they add more production and more supply to the marketplace at a time where, you know, maybe it’s not necessarily needed or at least that’s what the fears are. Right now, I think the market is more concerned with demand and economic activity, more so than supply or more supply from OPEC. Obviously, more supply from OPEC would kinda snowball that and potentially push WTI below fifty-five or below some of the lows we’ve seen at the beginning of April and bring Brent along for the ride with it into the low and mid-fifties.

SANICOLA: And yet refining margins are still holding up relatively well. Now, all the refiners have reported, and they started giving their outlooks for the rest of the year. How are they doing, and why are margins holding up despite the fact that demand remains an open question?

CINQUEGRANA: Yeah. So first quarter was kinda what we expected. Pretty lousy when it comes to refining margins from all the refiners that have released their first quarter earnings already. But one of the things that’s been catching my attention now: US oil, US gasoline inventories had been running below the five-year average. That’s been pretty consistent over the last, you know, couple of months. But what really caught my attention this week in the Energy Information Administration data was that current inventories are not below where they were last year. We would be running a million to two million barrels above 2023, 2024. Well, now we’re about a million and a half below where we were in 2024. So a little bit concerned about gasoline supplies. Demand as measured by the EIA also looks to be, pretty solid. Usually, you see a sharp drop off after the Easter holiday, but the most recent set of numbers, yes, they were lower, but they weren’t drastically lower like they were in previous years. So it looks like, and some of the refiners have talked about this that you’re seeing, you know, and I’m paraphrasing here. Some of the green shoots for gasoline demand in the summer driving season. So I do think that might be starting to show up a little bit, and that is what’s keeping refining margins, particularly gasoline margins, pretty steady, pretty strong. They’re at some of the highest levels since last May, which, again, is when you would expect to see, you know, stronger gasoline refining margin.

SANICOLA: If OPEC decides to take a more measured and nonaccelerated approach to bringing more production on the market or if, you know, Kazakhstan, for example, says, actually, we can curtail more than we thought we could, at this week’s meeting, could oil see a relief rally, and how high could that rally go given, you know, we do have these demand concerns driving the market?

CINQUEGRANA: Yeah. No. And I do think, you just described it perfectly, a relief rally. It’ll probably be a couple dollars worth of of price appreciation, but I think if you start to see empty ports, no ships coming into the ports of LA and Long Beach, for example, from China, I think that’s gonna cause some some greater concern about the economy as a whole. Obviously, there’s a lot of trucking that happens in the ports, moving, obviously, the goods from one place to another. That could have more of an impact than perhaps OPEC, keeping production as it was and having a little bit more discipline from some of the producers.

SANICOLA: Great. Well, thanks so much for explaining that, Denton, and thanks everyone for joining us. We’ll see you next week.