Oil prices: Don’t expect very high oil prices in the short term: Geoff Dennis

How important is the downward revision of global oil demand that we have seen in OPEC consequently? It has been reduced for three months in a row.
Geoff Dennis: It is symbolic because, of course, the Chinese economy is still weak and, despite the recent enthusiasm in the stock market, there is still not much evidence or clear signs of what we are going to get on the fiscal side, which would allow the people get more. optimistic about the Chinese economy.

So, that is one factor that has contributed to this reduction in OPEC’s demand forecast. At the same time, Europe is also quite weak and that plays a role. Let’s not forget that Saudi Arabia not long ago gave up its $100 oil price target and that it tends to keep prices under control and therefore accepts that there will not be a large increase in demand that will drive oil prices. oil up to that figure. level.

Now these are pretty small adjustments. We’re still talking about a good increase of just under two million barrels a day in demand by 2024, which is the current forecast, and 1.6 million barrels a day in 2025. That’s still a good increase of around 1 .5-2% annually and that still shows that the oil market is growing. The last point I want to make is that we have seen Brent for the last six weeks trading between $70 and $80. Last week it reached the upper end of the trading range due to the Middle East crisis, the political crisis and the terrible events happening there. All we have done now is move back a little towards the center of this trading range. So I’m not going to get too upset about this. It’s a logical move given all of these factors.

As you said, this could be quite symbolic. But the biggest uncertainties at play seem to be what is going to shape Chinese demand and the kind of demand outlook depends on what China is going to need in the times ahead. Furthermore, an important part of this is the shift towards cleaner energy. Aside from these, what are the main factors at play, at least in the long term, that would cause crude oil prices to move?
Geoff Dennis: Let’s talk about China for a moment and obviously China is taking a big step towards green energy and making more progress than many other countries. But on the sidelines, day in and day out, what is putting pressure on the oil price, as far as the Chinese economy is concerned, are the very disappointing growth numbers.

Until the Chinese take significant fiscal measures, people will remain skeptical about the Chinese economy in the short term and therefore that will have a marginal negative impact on the oil price. The other factor I would be watching very closely is how strong does the US economy become? It is growing very well, probably around the 2.5% to 3% range. And then on the positive side also for prices or the potential rise in prices, we have to see how this Middle East crisis plays out because if Israel attacks the oil facilities in Iran, that will reduce the production coming from Iran, which is a major exporter. currently and that would tend to hurt the price of oil a little. Right now, there are economic factors, both on the push and pull sides. China is weak, Europe is weak, the US is pretty good and there is potential upside risk anyway, until we have some clarity on a deal when it comes to the Middle East.Looking at the emerging markets that you follow closely, how will countries like India, which rely heavily on oil imports to meet our energy needs, like other emerging economies, fare? In case of higher oil prices, can reduced demand lead to lower production and limited supply, including due to geopolitical risks? But would that be longer term?
Geoff Dennis: Honestly, I don’t think we’re going to get much higher prices, especially since the Saudis are saying they’re going to give up on that $100 target. But clearly, if that were to happen, it would put pressure on India, pressure on markets like Türkiye, Korea and Taiwan.

In my post this morning, I commented that with the big rally in Chinese stocks over the last three weeks, China, Taiwan and India accounted for more than all the gains in the emerging markets index this year with dramatic moves in all three markets and I still really like India. One of the reasons is that I expect the Indian economy to continue growing well and I don’t see that there is going to be such a big increase in the oil price that we end up with a lot of upward pressure on the Indian economy from the oil price.

If anything, it would be more likely that it was the other way around. Now, there is another wild card that we need to keep in mind, and that is that I have a negative dollar, because eventually, when the Federal Reserve starts to cut interest rates a little more, we will see the dollar start to return to where it was. a few weeks ago and that would obviously tend to drive up the price of oil in dollars. So, there are a series of cross coins. At this point, I wouldn’t factor into the Indian stock market view that oil prices are rising sharply because I simply don’t believe that is the case.

Since you have indicated that you like what is happening in India, you like what you see in the stock markets and the economy looks strong. If the economy has to keep moving at the rate it is, what is the range that oil prices need to be in and what is the danger zone for you to see red as far as the Indian economy is concerned? ?
Geoff Dennis: It is a glacial process. One day it is at this level and the next day it is on red alert, if you will. But anything below $80 for Brent leaves India in pretty good shape. If you were to go to $90, that becomes much, much more complicated. Now, as previously reported, before talking about the inflation Last month’s numbers have not been as good as expected and I think there is still uncertainty about how quickly inflation can go down further and therefore what to do about interest rates in India.

Therefore, a big rise in oil price to mid-80s or even 90s, let alone $94 Brent, would be quite detrimental to the Indian story, at least in the short term. Frankly, the only way I see that happening is if the Middle East completely blows up, Iranian oil goes off the market, and perhaps others in the Middle East see their oil production decline. Without that, given the global economy where China is weak, Europe is weak, America is fine, we are not going to go above $80 for a certain period of time and India is okay with that.