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Oil to get a above $100 for an extended period of time will be ‘pretty difficult’: Portfolio Manager

Rob Thummel, Portfolio Manager and Managing Director at Tortoise, joins Yahoo Finance to discuss the demand in oil and impacts of the U.S. heat wave on the energy market.

Video Transcript

ALEXIS CHRISTOFOROUS: I want to stick with oil now and bring in Rob Thummel. He is portfolio manager and managing director at Tortoise. Rob, it's been a while. Always good to see you. I know you just heard Jared's report there on oil. Is the rise we're seeing really all about the reopening trade? Or does this have something to do with the Iran nuclear deal, the fact that talks to restore that plan between the US and Iran might actually be stalled? Because we saw that Iranian presidential election late last week in the country.

ROB THUMMEL: Yeah, Alexis, I think it's both. I think it's both. If you think about it, there is a lot of demand, as Jared just highlighted, for oil and oil-related products. And there's right now just not enough supply coming to the market quite yet. So we've seen inventories come down globally. And that's really helped boost oil prices. The Iranian negotiation would be additional supply, but now that seems to be pushed out and might not be coming to the market. So the reopening trade in general has really led the oil prices higher, as just global oil inventories have continued to decline.

KRISTIN MYERS: And Rob, curious to know how you see the heat wave that we have going on in California. I know that another one is supposed to be slamming the West Coast again. How do you see that impacting energy markets going forward, at least through to the end of the summer, into the fall?

ROB THUMMEL: Yeah, so the heat wave, obviously, that means we need more electricity demand. And so where does the electricity come from? It comes from natural gas. It comes from coal. Obviously, it comes from renewables as well. So from our perspective, we probably see increased electricity demand in the west and in the midwest, where I'm-- where we live. And that will be good for all energy commodities, but more so for natural gas and for renewables. And actually, we've even seen a little bit of an increase in demand for coal, not only just domestically, but also globally in Europe in particular, as well.

ALEXIS CHRISTOFOROUS: What about the price of WTI crude right now, at a 2 and 1/2 year high, settling above $73 a barrel? I mean, do you actually foresee that we could have $100 oil perhaps in the next 6 to 12 months? And what might get us there?

ROB THUMMEL: Yeah, there's some-- yeah, no, that's a very good question, Alexis. Short term, anything can happen, right? The Strait of Hormuz could get shut down temporarily, and oil prices could spike. There's a lot of geopolitical issues that could drive oil prices higher.

But for an extended period of time, I think it will be pretty difficult for oil to get above $100 for an extended period of time, just because we do have so much supply, both domestically in the US, but also globally as well. So I wouldn't expect oil prices to rise above 100 and stay there for a while. Often, $100 oil is actually not good for the energy sector. It's a little counterintuitive. But that just drives consumer demand down. And that's not good for anybody, whether it's the consumer or the energy sector as well.

ALEXIS CHRISTOFOROUS: All right, we're going to have to leave it there. But the conversation will be continued for sure because lots to move oil in the coming weeks, including that OPEC Plus meeting. Rob Thummel of Tortoise, thanks so much.