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

Transcript:

SANICOLA: Hi, everyone, and happy New Year. 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 as always for joining, and I think we should just start the year talking about, oil prices. So, last time we had OPIS on, at the end of last year, we talked about the January effect where commodity funds start to reposition for the new year, and that causes oil volatility. How are we seeing that play out, and do we think it’s sustainable, heading into the year?

DENTON CINQUEGRANA: Yeah. Well, first of all, happy New Year, Laura. Great to see you again. Yeah. We we see this, at the beginning of the year every year. Commodity indexes rebalance. Sometimes they add positions. Sometimes they take away. They’ll be adding some in in Brent in particular.

But, usually, that that usually happens kind of in the second week. You know? So it’s still a couple days away, so you might see some coming into the market to kinda catch that and maybe front run it a little bit, if you will. But, really, over the last, say, almost ten years, the first four days of the trading year have provided some upside to oil, obviously, to varying degrees depending on the year. I don’t think that’s something you could depend on going forward because those large speculators that have chased oil in the past, they’ve moved on to other investment vehicles, say crypto, say big tech, stuff like that. So oil hasn’t been a place where you just go and park money and wait for the next event to happen and prices go up.

That being said, I don’t think that’s necessarily a sustainable thing. You know, we believe that the front three months, three and a half months is gonna be a front loaded year for oil prices, and then OPEC brings back some production. Demand tends to level off or or kinda rise for for the summer driving season and then levels off. So I think you’re gonna have a period where we’re gonna have a supply outstripping demand for oil. So while we have a we’re in a nice little upswing here. I’m not sure it’s sustainable.

SANICOLA: And, of course, all eyes are going to be on China’s economy, which was a main driver of oil prices. Last year, as the country attempts to rehabilitate some of its, different parts of its economy to drive and and potentially drive demand for oil, are there any early indicators we’re seeing on China’s economic recovery or any other indicators on oil usage? Obviously, this is a country that’s made dramatic moves into electric vehicles in the past couple of years.

CINQUEGRANA: Yeah. It’s probably still a little too early, but that being said, the stimulus being added into the economy can’t be discounted. It’ll help stoke demand. But, also, like you mentioned, there’s been a big push there for electric vehicles. So we definitely believe that gasoline demand peaks are in the rearview mirror, for lack of a better term, in China. So while there probably is still some oil demand growth going forward, it’s gonna be a lot smaller than what had been anticipated or what has been proven over the last several years.

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