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The price of gas will get ‘worse before it gets better’: Truist Securities Managing Dir.

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Neal Dingmann, Truist Securities Managing Director, joins Yahoo Finance to discuss Exxon and Chevron’s earnings amid the recovery in oil and outlook on gas prices.

Video Transcript

- I want to-- to continue that conversation, particularly on Chevron and Exxon Mobil. Both companies reporting profits for the second straight quarter as we saw oil and gas prices spike amid some higher demand levels.

We're joined now by Neil Dingmann, Managing Director at Truist Securities. So Neil, as I just mentioned, we have seen some of those oil prices spiking lately. We've been seeing demand raising.

I'm curious to know how long you think particularly on the demand front that's going to last especially as we see this Delta variant surging not just here at home in the United States, but really around the world. Of course, potentially impacting travel going forward.

NEIL DINGMANN: Good afternoon, Chris. That's the $100,000 question. I think what's very important is US on the demand side. I mean, what's really nice is on the supply side, we're certainly seeing, especially here in the States absolutely very, very little incremental new supply.

So when it comes to what we see on the demand side, we don't have to see a ton of demand week in week out as long as we see just a slow and steady demand as we've certainly as we've seen over the last several weeks. And so again, I'm still relatively confident that maybe we won't get the type of demand. We-- we of course, have seen the last two or three months.

But could we see at least a slow and steady demand. I think absolutely that coupled with virtually no new supply here in the United States. And I think is what keeps prices higher.

- And of course, when-- when it comes to supply, I think everyone was paying a lot of attention on OPEC. Of course, they had failed to reach some sort of consensus. They finally did come to a decision choosing to boost oil production.

As again, we see some of these prices spiking. What could that impact be on Exxon and on Chevron going forward?

NEIL DINGMANN: Sure. I mean, as you pointed out. They mean that-- that that's sort of OPEC has laid it out. They're basically going to take the $5 million or so excess barrels that they have voluntarily shut in each month put 400,000 back.

The key question is going to be you hit it earlier on demand. Once we get to sort of the end of next year and that entire $5 million is back online, and it's purely a supply demand story. What happens at that point?

And again, if demand still continues to outstrip supply at that point, which most people think they do, prices could go even much higher than where we are now. I know there's people. I'm not there.

But I know there's people thinking beyond the $70, $80, $90 to even $100 is very possible. And I would say if demand is still outstripping supply, once we get to basically the end of next year and all that voluntary production has come back online, then higher prices are very likely.

- When could we hit that $90 level.

NEIL DINGMANN: I think, you know, again, virtually next year, I think is going to be the key. Somewhere-- somewhere around it 14 to 16 months from today. That to me is about how long it will take to bring all that voluntary production back online.

Again, I think coupled with that, I think, you know, you've had you mentioned the two big ones today. Chevron and Exxon. You actually had where Chevron or as you say Exxon actually had their production sequentially fall a little bit.

So what's interesting is even the large players in the US, not only not growing but even their production is falling a little bit, which again just continues to add potentially more to that-- that supply demand imbalance.

- I want to ask specifically about Exxon Mobil. It wasn't too long ago that we were talking quite a bit. About some of the shake UPS that was happening there, especially with that activist investor group being able to score two seats on the board.

What do you think is coming then from Exxon? Do you think there's going to be more of an increased focus on renewable energy?

NEIL DINGMANN: Yes. I think it's probably was too early and they didn't address it as much and nobody expected it to time. But I think Christine, that two things are going to come from this basically new-- new board makeup. And I think number one you hit it definitely much more on newer green energy.

I think that they've already talked about a new energy program. They've talked about all sorts of different, all sorts of different alternatives are sort of uses.

- Sir, do you have the overhead I?

NEIL DINGMANN: And then lastly, I think they're talking about. Again and is it with all this free cash flow they're doing, they're talking about Nelson throwing that free cash flow immediately versus kind of sitting on that in past. And they're talking about changing that up in the sort of near future.

- I want to just quickly ask you here. I think one of the big questions that a lot of folks have, especially as they've been going to the pumps and seeing these really high oil prices is when gasoline is going to be cheaper. So I want to ask you Neil, when is it going to get cheaper to fill up the gas tank?

NEIL DINGMANN: I'm afraid it's going to get worse before it gets better for the consumer. Because the problem is as oil prices go on, you sort of look at that crack spread that the US refiners. And the problem you have is you haven't had a new refinery virtually any new capacity in the US for now multi years.

And as soon as you have prices go up, the only thing that could potentially cause that to go down at the pump would be more of capacity coming on. And I just don't see that in the US refining business.

- All right. The hate to end on that negative note is bad news. For everyone out there, especially if they're trying to take some road trips throughout the rest of the summer into the fall. Neil Dingman true Securities Managing Director. Thanks so much for joining us.