Tom Kloza expects more gains in oil.
He leads a global analysis for the Oil Price Information
Service.
Tom, great to see you.
Very nice to be here.
It's been quite a run.
I think a lot of people
Go ahead. I'm sorry, sorry,
I was going to ask you.
There's a seasonality issue and then there's a geopolitical issue
kind of working in tandem at this point.
Yeah. And there's really the seasonality is the big thing.
I mean back in the fall when we had the
the Middle East WAR,
it couldn't offset the tendency of the cycle to see
crude oil prices dropped by about
28%. Now we're in the time of the year,
we're typically from a winter bottom to a a
second quarter high. We go up 30 or 40%
and we're probably in the 6th or 7th inning of
that rally right now.
And you also think hurricane season could be worse than
in past years.
Yeah, I would use the metaphor of the Bactrian Camel
for gasoline this year.
We're kind of moving to the first hump right now
and typically it'll be an old trade about a month
from now and a lot of people will get out
of it. But that second pump
when we get into August and the Saudis are selling
less crude because of air conditioning needs and the hurricane,
you know, chases are out.
That's when we really got to worry about it.
And I, I think that'll be the second hump where
retail prices will go,
who knows how much higher.
I think this rally will stall out at about
375 to 390 for US prices.
Well, that's interesting, Tom, because gasoline,
I mean, we're typically three or four months ahead of
when gas should start to get on its horse.
And nobody's been talking about the gasoline move except if
you look at the refiner.
So you mentioned sort of six 7th inning,
what inning you think we're in for some of these
refiners which have been unbelievable.
Well, they're going to have great earnings and they're going
to have great comments about the second quarter start going
into the earnings in a couple of weeks.
I do think that it'll come back a little bit.
All three products, the three main products are gasoline,
diesel and jet fuel. They're performing on all cylinders right
now.
It'll take a little bit of a break probably on
gasoline because we're running so much light,
sweet crude. But then at the the middle point of
the third quarter,
I think the prices go higher again and they go
higher because there's a lot of storm chasers who will
be long gasoline futures or options at that point.
Tom, it's Tim. Thanks for joining us there.
There's also a lot of chasers in in the oil
services space and you know you've you've talked a little
bit about the OIH and your notes and and you
know I have been very bullish on Schlumberger.
The earnings ability and the operational leverage in their business
is something that I think is,
is significant but hasn't been achieved.
I mean if you look at the heyday,
we're talking about 20/16/2017 and and so the company's not
wicked cheap relative to its earnings power.
Any thoughts here on when these drillers really start to
shift into the next gear,
even in a in just call it status quo for
where we are in pricing?
Well, you know, there was a chart that was going
around about a month ago that showed the XLE companies
versus NVIDIA and it was just an incredible chart.
If you look at it since that month,
the XLE companies have all gone up,
whether on the production side or the refining side,
and I think they're going to continue to do well.
There's a lot of people that think the energy crisis
or excuse me,
the peak demand occurs in
2028, but there's a lot of folks who think it's
2035 to 2040 as well.
So that's pretty long lead time right now.