00:00 Julie
If you look at the background of the oil market, for example, Goldman Sachs, um the commodity desk over there just raising its price targets for Brent and WTI, sort of X Iran.
00:13 Julie
And indeed we’ve seen this rally this year in oil prices that at least not a lot of people I was talking to were expecting because it looked like we had a lot of supply out there.
00:26 Julie
So, what what happened this year that kind of changed that scenario?
00:45 Speaker B
So that’s a great point and they’re not the only Goldman’s not the only one raising their target this morning. Morgan Stanley did also. Um again, ex geopolitical events. And I think this is the this is the setup.
01:00 Speaker B
Everyone was expecting two and a half to three million barrels of surplus coming into 2026 for the first quarter at least, if not for the whole year. That’s a pretty extreme number.
01:11 Speaker B
What we’ve seen is the weather that we just discussed for Nat Gas also impacted crude production in the US.
01:19 Speaker B
We had Kazakhstan have a fire in one of their power plants and they impacted crude supply.
01:25 Speaker B
We’ve had the CPC pipeline that was supposed to be coming back up in early January delayed. So we’ve had a supply event outside of geopolitical risk that has taken supply down and demand has actually been fairly robust. Cold weather, more demand for heating oil, etc.
01:46 Speaker B
So the surplus that everyone had been pricing in to get to those price targets in the mid 50s, which is where they were before they raised them this morning, you needed to see those inventories really building.
01:59 Speaker B
And the inventories just haven’t been building in the OECD centers. There is a lot of crude on water, but if we think about that, you know, is that really something you can translate into feeling like that’s inventories that can be drawn on quickly, um in in an event to meet a demand spike or, you know, a supply gap, not necessarily.
02:22 Speaker B
And then the other thing is China has continued to stock pile a lot of crude in the start at the start of the year, keeping those surplus out of the visible inventory centers.
02:34 Speaker B
So that’s why we’re seeing those price targets come up, but the bearishness was so pervasive, Julie, coming into the start of the year that I’m not surprised we’re seeing that and $60 targets are not extremely high. 55 was I think kind of an over bearish estimation coming into the start of the year.
