00:00 julie
If you look at the backdrop of the oil market, for example, Goldman Sachs, well, the commodities desk there just raised their price targets on Brent and WTI, kind of like X Iran.
00:13 julie
We’ve actually seen an increase in oil prices this year that at least a lot of people I’ve talked to didn’t expect because it looks like we have a lot of supply.
00:26 julie
So, what happened this year to change that?
00:45 Speaker B
So that’s a good point, they’re not the only Goldman Sachs firm raising their targets this morning. Morgan Stanley did the same. Well, it’s geopolitical events again. I think that’s the setup.
01:00 Speaker B
Everyone expects a surplus of 25 to 3 million barrels for at least the first quarter of 2026, if not for the entire year. This is a pretty extreme number.
01:11 Speaker B
What we’re seeing is that the natural gas weather that we just discussed is also affecting U.S. crude oil production.
01:19 Speaker B
A fire broke out at a power plant in Kazakhstan, affecting crude oil supplies.
01:25 Speaker B
Our CPC pipeline, which was supposed to resume in early January, has been delayed. So we have a supply event on top of geopolitical risks that causes supply to fall while demand is actually quite strong. Cold weather increases demand for heating oil, etc.
01:46 Speaker B
So to get to the mid-50s price target that everyone is pricing in a surplus, which is where they were before they raised prices this morning, you need to see those stocks really build.
01:59 Speaker B
And the OECD center’s inventory has not yet been established. There’s a lot of crude oil on the water, but if we think about it, you know, that really translates into a sense of being able to draw down inventories quickly, um, in order to meet a surge in demand or, you know, not necessarily a supply gap.
02:22 Speaker B
Another thing is that China has continued to store large amounts of crude oil since the beginning of the year, keeping this excess crude out of visible storage centers.
02:34 Speaker B
So that’s why we’re seeing these price targets come up, but Julie, I’m not surprised that bearish sentiment was so prevalent at the beginning of the year, we saw that $60 target wasn’t very high. I think 55 was an overly pessimistic estimate at the beginning of the year.
