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U. S. refiners are poised to ramp up production, Yawger said, as geopolitical tensions and the upcoming “driving season” will put pressure on supply. However, Yawger warns that the value of fuel is unlikely to go up: Refiners learned the lesson of COVID when the value soared to $5 and demand plummeted. “They’re going to make an attempt to bring the value down to around $3. 50. . . They know what’s going to happen if fuel gets to $5,” Yawger says.
The outlook for oil is exacerbated by China’s call to the situation. In the wake of COVID, China has “taken the market to the moon,” but according to Yawger, “that’s not an option anytime soon. “Be a long-term demand agent: Yawger explains that the gigantic population will soon be driving gas-guzzling, used American vehicles. With this in mind, Yawger predicts that peak oil production won’t occur until 2035.
For more information and the latest market actions, click here to watch this full episode of Yahoo Finance Live.
Oil costs (CL=F, BZ=F) fell again on Friday after crossing the $80 threshold in mid-March. Bob Yawger, CEO of Energy Futures at Mizuho Americas, joins Yahoo Finance Live to discuss broader trends in oil and fuel markets.
U. S. refiners are poised to ramp up production, Yawger said, as geopolitical tensions and the upcoming “driving season” will put pressure on supply. However, Yawger warns that the value of fuel is unlikely to go up: Refiners learned the lesson of COVID when the value soared to $5 and demand plummeted. “They’re going to make an attempt to bring the value down to around $3. 50. . . They know what’s going to happen if fuel gets to $5,” Yawger says.
The outlook for oil is exacerbated by China’s call to the situation. Post-COVID, China has “taken the market to the moon,” but according to Yawger, “that’s not going to happen anytime soon. “be a long-term demand agent: Yawger explains that the country’s sizable population will soon be driving gas-guzzling, used U. S. vehicles. With this in mind, Yawger predicts that peak oil production won’t occur until 2035.
For more information and the latest market actions, click here to watch this full episode of Yahoo Finance Live.
Editor’s note: This article is written through Gabriel Roy.
JOSH LIPTON: Oil costs are falling again in today’s trading. That’s after the above this week. With more, we’re now joined by Bob Yawger, Executive Director of Energy Futures at Mizuho Americas. Bob, it’s smart to have you here.
BOB YAWGER: Thank you for having me.
JOSH LIPTON: So, it’s appealing to think about oil here, just tug of war, Bob. One thinks of geopolitical conflicts, but on the other hand, one has to take a look at a more powerful dollar. As far as oil is concerned, just under 81 here. Where do you think we’re going, Bob, in the short to medium term?
BOB YAWGER: Well, in addition to the geopolitical facets involved, we’re two months away from driving season. So right now, the refineries in this country are going to start ramping up their activity. They will get a lot of crude oil to the refinery. It’s a seasonal thing that happens every year.
We had a lot of demand in the last two weeks of March, which is very rare. And gas has outperformed crude oil on the positive side. That’s one of the things that propelled crude oil to a new high, the new multi-month high. We got to this previous week in the week.
And this latest garage report says that demand has weakened a little bit, but it’s a really smart sign that demand is very strong. That’s nine million barrels per day. The all-time record is 10 million barrels per day and that was the summer of 2021.
JULIE HYMAN: I need. . . We’ll go back to oil, but I’d like to ask a little bit more about gas because a lot of drivers pay a lot of attention to it. The fate of essence has political consequences. So, do you think we’re going to continue to see this upward trend more than seasonally in the summer?
BOB YAWGER: Well, I think the refinery has learned its lesson. Coming out of COVID, the belief was that the American driver was looking to drive and burn fuel like there was no tomorrow. And the value at the pump went up to $5. a gallon. He killed the goose that laid the golden eggs. The driver stopped driving and the refiner found himself holding the barrel.
So prices have come down very temporarily and I think they’ve learned their lesson. They’ll probably try to bring the value down to around $3. 50 at most, maybe $4. Basically, we’re at $3. 25 right now. And they know what’s going to happen if we get to $5. They will lose the squad quite temporarily.
JULIE HYMAN: So that’s good news for other people who drive. . .
BOB YAWGER: That’s news, yes.
JULIE HYMAN: -around.
BOB YAWGER: That’s right. And I think there’s also some political tension to not make it because of inflation.
JOSH LIPTON: And Bob, I also need to know your opinion, you’re looking for China, which is still a little fragile there. What effect does this have on your oil prospects?
BOB YAWGER: That’s not smart at all. That’s a big number. Their call: thanks to them, we were able to get to where we are today after COVID, after negative prices.
When demand disappeared off the face of the Earth with the onset of COVID and we went to negative prices, two things happened. Saudi production was reduced and China eventually emerged and was the main driving force of demand that propelled the market to the Moon. That may not happen again. It does not appear that this is planned for the foreseeable future.
So they’re not going to. . . There’s not going to be a destruction of demand, but they’re going to stay at that level, maybe a few more barrels. But they’re not going to take over the market and shoot themselves with it. And that’s a dilemma for the OPEC people.
They want that demand. They are starting to see India as the driving force of long-term demand. So the situation is different. . .
JOSH LIPTON: How’s that, Bob?
BOB YAWGER: There are another 1. 3 million people there. Many of them don’t drive right now. And they’re going to buy old cars in the U. S. And the rest of the world will send them.
And they are power guzzlers. The largest refinery in the world is the one that produces 1 million barrels per day. It’s a monster and it’s there for a reason.
JULIE HYMAN: As we were talking before our broadcast, I was in Houston this week at CERAWeek, which is the big annual conference on petroleum and fuels. And there has been, in some ways, a new reluctance on the part of the oil industry component towards energy. transition, right? Saudi Aramco’s CEO called the concept that lately we’re moving away from oil and fuel and want to invest more as a fantasy. What is your position with respect to the maximum demand factor, where are we on that continuum?
BOB YAWGER: Well, there’s two sides to this story. First, the ECO Clean Energy Index, for starters, is trading at its lowest point in several years. Therefore, as a combined index containing 75 names, it is dead. It doesn’t work.
Many of the names in this index are simply not profitable. At the end of the day, those technologies can’t compete with fossil fuels. And that’s why the other people involved have moved a little bit away from that area.
On the other hand, we’re going to. . . We will probably set the new target figure around 2035. So we still have 10 years left. We will first have to succeed on this stage in India and other emerging Third World countries. They’re not going to drive new Teslas anytime soon and that will put the peak oil story on the back burner for a while.
On the other hand, some blank energy companies are doing very well. For example, Constellation Energy is a nuclear application and also offers a lot of blank energy mixing. This is the third best performing call in the S.
So there are other names like [INAUDIBLE] that are doing very well. They provide empty electrical infrastructure to a giant number of people who participate in them. So there are two sides to this story. But fossil fuels aren’t going away. It’s not going to disappear from the scene anytime soon.
JULIE HYMAN: Well, yes.
JOSH LIPTON: Bob, thank you so much for being with us today. Enjoy.
BOB YAWGER: Thank you. Thank you for having me.