00:00 Speaker A
Oil prices were little changed on Monday, as investors weighed an uncertain trade backdrop between the US and China, along with an upcoming OPEC Plus meeting. Here to discuss what’s next in the near term for oil. We’ve got Eric Lee, Citi’s Global Energy Strategist. Eric, great to have you in studio with us. So I know that a little bit more long term, you do expect there to potentially be a rebound, but in the short term, how much more bearishness are you anticipating?
00:35 Eric Lee
Yeah, sure. Thank you. I mean, we continue to have a view where we could see $60 Brent again in the coming short term this quarter, but potentially also through to the end of the year. So our outlook, you know, for the rest of the year on average is somewhere around 60, $62, the low 60s. So we continue to see the broader bearish sentiment continue to play out, and there’s a lot of things that we continue to need to see play out. You know, what are the effects of the tariffs going to be, how does that filter through to oil demand, and then also, what will OPEC Plus do? Are they going to keep bringing oil back on, and they’re bringing quite a bit on in May.
01:30 Speaker A
And how are you thinking about policy in the midst of this, particularly given the Trump administration’s interest in keeping the price of oil low, to what extent does that inform your view?
01:44 Eric Lee
Yeah, that’s that’s a very core part of our view. So when we think about some of the core interests of the administration, one of them we think is getting oil prices down with the belief that this will get energy costs down and inflation down, and then perhaps even interest rates. Now the pass through may not be that simple, but we do believe that they believe that, and so we do think that that’s an important consideration, and it does mean it might affect how they do geopolitical deal making with Russia, Ukraine, Iran, Venezuela, but also just broader policy. Are they going to try to support the U.S. oil and gas sector to try to incrementally help production be higher than it otherwise would be?
02:49 Speaker A
Sure. Yeah, and I want to draw out this connection a little bit more between the price of oil and the economy because from where I sit as a risk manager, thinking about how it affects our portfolios, my mind always goes back to economic growth, right? So when you’re looking at the price of Brent oil, is there a price level or a certain signal that would make you say, ah, you know, we’re seeing we’re seeing lower demand really start to weigh on oil prices right now.
03:23 Eric Lee
Yeah, sure. I mean, it’s always going to be so many factors at once, especially in this current market, but demand is so core, and I think that’s what drove the big sell-off post April 2nd, right? The fact that we were going to see pretty big tariffs and that they might be quite sticky. That drove Brent from what had been about $75 in the days just before that to where we are now, 66-ish, right? And we’ve of course last two weeks, we saw like $59 oil. So that in some sense has already happened, but there’s more that can come. If you do get recessions, prices can fall lower and they they and they find support at some sense of where marginal costs can be.