Oil analyst: ‘All cards are on the table’ at next OPEC+ meeting
KPMG Energy Natural Resources & Chemicals National Sector Leader Angie Gildea joins Yahoo Finance Live to discuss the move in oil prices and expected impacts from OPEC+ supply cuts and Russian oil sanctions.
Video Transcript
AKIKO FUJITA: Top exporter Saudi Arabia reaffirms OPEC+ is sticking with its output cuts, denying a report that said OPEC was considering boosting output. Joining us now, more on the energy space, we've got Angie Gildea. She's KPMG Energy, Natural Resources, and Chemicals National Sector leader.
Angie, when you look at where the price action has been, where energy has moved, on the one hand, you've got the concerns about supply, especially with those sanctions coming down from Europe on Russian oil in December, and yet, here we are, again, talking about lockdowns over in China because of COVID policy, which has certainly hit demand. How do you weigh the demand and supply picture right now?
ANGIE GILDEA: It's a complex picture. I think we've worked out some of the challenges we have around supply, barring any significant disruption around what happens with the Russian situation. But from a demand standpoint, that's really the big unknown right now. The China lockdowns seem to continue. They're not bouncing back as fast as maybe some would have hoped. And the other indication is potentially weather. We're entering the winter months. And any sort of significant disruption around weather as well is potentially a challenge.
AKIKO FUJITA: You think back to the previous OPEC meeting. Obviously, certainly, some tension brewing there between the US and Saudi Arabia when Saudi Arabia went ahead and cut production. Said, essentially, well, this is all about economics, and the demand picture has nothing to do with the tensions with the US. When you look at where things are right now, I mean, does it make sense, even though Saudi Arabia is currently denying it, does it make sense to move in the reverse in this upcoming meeting?
ANGIE GILDEA: You know, I think at this point, all cards are on the table. But we really have to see what happens with the price cap around the Russian crude. Is the price going to be enough to continue to incentivize the Russians not to take their supply completely off the market, but also to prevent them from profiting so much from the price? So until we really understand what that cap looks like, how the Russians are going to react, I think the Saudis and OPEC are kind of a wait and see approach.
AKIKO FUJITA: Specifically on what's about to play out over in Europe at the beginning of December, those sanctions against Russian oil taking effect, how much of that's already been priced in? I mean, there was this headline coming out of Bloomberg yesterday, essentially said Russia's already lost 90% of its key European market. Are we likely to see a big move in the price, or has that already been pretty much baked in?
ANGIE GILDEA: I do think it's been baked in for now, barring, of course, any sort of extreme situation. It feels like to me that oil is about where it needs to be. I'm happy with the price right now. So I think a lot of those fears and anxieties were baked in. And the demand standpoint, again, is another big question that still has to play out. But for now, it seems about right.
AKIKO FUJITA: Looking at the domestic picture here, we've certainly seen some moves from the Biden administration just expanding the SPR release as well. Obviously, those reserves have largely been depleted. When you look into the critical winter months, I mean, how significant is a spike likely to be here? And for a lot of those drivers who are looking at gas prices, what should they be expecting?
ANGIE GILDEA: Yeah, well, there's two buffers to the fluctuation around oil prices. One is around your inventories, and the second is around spare capacity. And as you said, we've depleted a good bit of the inventories right now. Lower prices does help boost inventory. So as we can continue to see lower prices, I think that will actually help inventories.
But in terms of consumers and what they can expect, at the pump, consumers are paying more than they have previously on Thanksgiving holidays for gas prices, although I will say it's just pennies over what they were paying right before Russia attacked Ukraine. So consumers have seen a relief at the pump. And I think that will continue at least for the next couple of weeks, hopefully a bit longer into the holiday season so that consumers can get a break.
AKIKO FUJITA: Certainly welcome news for a lot of drivers out there. KPMG National Sector leader Angie Gildea, good to talk to you today.
