Expect a ‘big tug of war’ in oil market in 2024: Expert

Geopolitical conflicts were a major cause for concern in the oil market in 2023 and oil prices are a focus in the coming year.

Scott Bauer, Prosper Trading Academy CEO joins Yahoo Finance Live to weigh in on the outlook for in 2024 and what to expect if conflicts in the Middle East intensify. Bauer does not expect major pressure but does note a “geopolitical premium” hitting $5-$10 per barrel.

Bauer expects the six-handle “until something starts to shift out of China” and does predict a “big tug of war”, that would still ultimately result in the trajectory being on the down side.

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Crude oil has been on a roller coaster ride this year there have been no shortage of catalysts from fed policy to inventory levels and of course geopolitical risks our next guest thinks the oil Market is facing a tug of war on one side geopolitics and production cuts

On the other shrinking demand out of China and record production out of the US Scott Bower Prosper trading CEO here to tell us more so Scott perhaps we start there who is winning the game of tug-of warar right now that that’s a tossup it really is I do

Think that down the road barring any escalation of of geopolitical events which is always you know impossible to to predict I do think oil ticks lower I think we’re going to see a six handle uh sooner rather than later again barring any sort of geopolitical event but you

Know you really do have so many factors on both sides of the aisle here right you you’ve got the geopolitics the the you know most recent is what’s going on on out with with all of the shipping containers pretty much being halted right now so that’s number one you’ve

Got Russia deepening their Cuts I’m not so sure how much that affects the marketplace because I think a lot of that is factored in uh but you also have you know OPEC cuts and then on the other side now you’ve got the demand destruction and I call it destruction

Out of China and record production right here in the US so it is really you know this give and take but I do think the fact that this demand destruction coupled with our record production wins out in the end barring any sort of geopolitical escalation so Scott we we

Could see more pressure here on crude prices saying a six handle here at some point are we going to stay at that level or taking a look maybe with a longer term view how do you see some of the factors if we do see this return demand or obviously the uh million dollar

Question just in terms of a escalating conflict here in the Middle East or elsewhere how that could then eventually Drive prices higher yeah so I I I really believe that that if there’s an escalation you know the geopolitical premium if you will is probably five to10 a barrel so I I would

Look at you know 78 to 80 let’s call it being an absolute top but I don’t think we get back there again unless there’s something that happens I do think longer run here we see this six handle until something starts to shift out of China because again we are producing more and

More and more out of the peran that’s why you’re seeing companies you know in these big transactions like what oxy did last week not only are they producing more but they’re getting more efficient they’re doing it with less rigs so the the efficiency at what they are

Producing is at record levels as well so to me everything is pointing to a lower price per barrel here obviously you also have the weakening dollar which has helped commodity prices because we we know the dynamic there so big big tug-of-war but I really believe the trajectory is on the downside well the

Acquisitions that we we’ve seen over the course of this year will they be net positive for that that price per barrel I think they will actually wind up being net negative because of the efficiencies but as as I was reading through and really understanding the oxy transaction they look at long term a

Sustained profitability around $50 a barrel that’s kind of their Benchmark that’s a long way down from where we are right now so I actually think that this is going to be uh net negative for the price of oil but they’re going to be able to produce more more efficiently

Their margins may actually get better Scott we certainly have seen an uptake in m&a when it comes to the energy sector here over the last several weeks looking ahead though to what that future consolidation will look like and ultimately how that’s going to impact the price of crude down the line what do

You see there I think we’re we’re going to continue the big players in in the marketpl the Chevrons the exons oxy they’re doing this because they know that the competition is getting smaller and smaller and smaller and they need a piece of it and they really see that the

Peran and and production here in the US they see the efficiency of it now are they getting to a top perhaps are we at maximum capacity in terms of production we’re probably getting there but I think we’re going to see more and more consolidation because some of the

Smaller players in in the marketplace look at this also and say boy if we don’t get ourselves out there if we don’t make a move and you know maybe get acquired by some of the bigger guys in the marketplace here we may be left out

In the cold are the days of oil having a profound impact on the inflationary picture behind us temporarily yes unless unless inflation starts to rear its ugly head again if we if we start to see some some really bad prints if you know pce starts

To go up not just the report we get later this week but month over month then yes that can happen but that you know seeing seeing gasoline prices now at a national level of almost under three bucks a gallon compared to where we were at four four and a half a gallon

Just a year ago boy that’s a a huge amount of inflationary pressure that’s off I can’t say we’re not going to get there again but imminently or within the next few quarters yeah I I don’t see that at all and I do think that that helps ease that inflation worry all

Right Scott power we always great to get your Insight thanks so much for joining us here this morning Prosper Trading Academy CE very much