Babin: 2025 will be ugly for the oil markets as demand dynamics shift

Babin: 2025 will be ugly for the oil markets as demand dynamics shift

of course our our first thought are with the people in the path of the hurricane uh their safety and and the lives that may be impacted um but you know obviously we’re also looking at what this possible investor impact could be uh the fact that this is looking to weaken a bit down to a tropical storm what do you think that means for the oil Market in the short term so I think in the short term the fact that it’s a tropical storm means that we won’t see significant long-term production outages I do think we will see some shut inss um from Mexico the storm is scheduled to hit the Bay of cache sometime over the weekend that is a major um place where Mexico has several export terminals there’s a similar storm that followed this course in 2006 Tropic tropical storm Chris and that caused Mexico to shut in production for two or three days so we could see shut inss in Mexico of around 800,000 barrels for about two or three days as a result of this tropical storm now that is not going to have a long-term Market impact and even not potentially a short-term Market impact you see these big impacts when production is shut in for over two weeks so I think what Barrel really has done to the market however is send a wakeup call as you mentioned in the leadin this is going to be a very active hurricane season and this is the earliest Category 5 hurricane that has ever formed so this this kind of push and pull between okay this storm isn’t going to have a production impact but wait we have a very long hurricane season ahead of us let me cover some shorts let me buy some upside tail Hedges because I don’t want to be the one who didn’t heed the warnings that came not only from the weather services but from this early indication of how the season’s going to play out so we’re seeing movement in the actual oil market and also in the options Market as people try to hedge their risk here a bit um I want to look further out we’re entering summer driving season um we’re seeing some signs of production pick up back up in China which also can be um you know a a a boost on demand for oil as well how does this fact that we’re going to see this uh you know extraordinary as NOA called it hurricane season how does that impact the oil Market longer term and of course we’re seeing the OPEC Cuts wind down later in the year so over the longer term I think what this potentially does is tighten the market over the short term and when OPEC starts to unwind their cuts at the back back end of the year maybe not have as a much much of a pronounced impact driving prices lower right if we have summer driving season that’s strong third quarter we’re expecting the market to be in over a million Barrel deficit throughout the third quarter so if those inventories which we expect to start to rebuild in the fourth quarter are are more depleted due to excessive storms summer driving season being strong China coming back from refinery maintenance season all of those things we will then see as OPEC has production to bring online we don’t see the market impact that the market is anticipating which is that the market flips from a deficit to being over supplied so the longer term impact is it kind of shifts back where we start to see the market flip into being overs supplied from late fourth quarter into 2025 2025 Frank is kind of ugly for crude markets even with storms even with China we’re looking at demand growth of a million barrels a day approximately in 2025 and non OPEC Supply growth coming in closer to 1.5 million barrels a day so OPEC plus doesn’t have a lot of room here they’re looking at the next several months of you know fourth quarter where they can unwind Cuts before they have to probably start thinking about cutting again um in early 2025 just based on where balances are looking

Rebecca Babin, Senior Energy Trader at CIBC Private Wealth, discusses oil prices in response to the summer driving season and Hurricane Beryl.