Is $40 WTI Oil on the Horizon? – Mike McGlone

In this analytical segment, Bloomberg Intelligence’s Senior Commodity Strategist, Mike McGlone, joins Jeremy Szafron, Anchor at Kitco News, to discuss the commodities market’s current state and future projections. With geopolitical tensions escalating and the commodities market experiencing significant volatility, particularly in oil and precious metals, McGlone offers a deep dive into the factors influencing these trends. From the implications of the recent drone attack in Northeastern Jordan to the strategic dynamics of the Red Sea region, gain a comprehensive understanding of how these developments are shaping the global commodities landscape in 2024.

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00:00 – Introduction: Focus on Volatile Commodities Market
00:29 – Geopolitical Upheavals and Impact on Global Oil Market
00:58 – Importance of the Red Sea Region in Oil Supply
01:27 – Crude Oil’s Bear Market Trajectory: Historical Context
02:21 – Analyzing WTI’s Potential Drop to $40
03:15 – Global Recession Indicators and Commodity Trends
04:38 – Projection of WTI Crude Oil to $40 Mark
05:05 – Factors Leading to Oil Price Changes
06:27 – US LNG Ban and its Market Implications
07:49 – Bitcoin, Gold Relationship, and Market Predictions

#redsea #oilandgas #wticrudeoil #gold #bitcoin #oilprices #lng #silvermarket #copper
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Kitco News is the gold standard in precious metals, commodities, cryptocurrencies, mining, and financial news.

SUBSCRIBE to our channel to stay up to date on the latest market and industry news.

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Hey everyone I’m Jeremy saffron and this is Kitco news now we’re focusing on the volatile Commodities market today and this volatility comes at a time of extreme geopolitical concerns in the Middle East the recent drone attack in northeastern Jordan claiming American lives has intensified Global Security concerned and its ripples are being felt

In the Commodities Market particularly in oil gas and in Precious Metals now our next guest says crude oil risks following gas back to its 2019 levels joining us to unpack these developments is Mike mclone Senior commodity strategist at Bloomberg intelligence Mike thanks for having uh thanks for

Being on the show with us today hello Jeremy thank you for having of course now there’s so many things going on let’s start with the recent geopolitical upheavals particularly of course the attack in Jordan and the US’s response I’m curious how these events influence the global oil Market especially

Considering the Strategic importance of the Red Sea region here well I think people are realiz in how much more important it it’s become particularly since Russians invasion of Ukraine a lot of that Russian crude oil is now going through the Red Sea and heading towards China um but it’s the

Unique thing about the attack is typically these things are very bad for crude oil let look at the last most recent example September 2019 when there was a significant attack on Saudi infrastructure knocked out maybe five million barrels a day pumped up WTI from

50 to 63 and then it went back down um and it didn’t really go back much up so I think the situation we’re in right now is the Market’s waiting for things like this for Traders to sell um right and because they’re a pretty significant bare Market that’s that’s just crude oil

If crude oil catches up the natural gas it’d be around $50 a barrel or lower if it catches up The Corn it’d be probably same thing $50 or lower even industrial metal so you can’t look at it I look at it right now crude oils basically has a

$20 premium compared to most other Commodities are still collapsing and um it’s just a matter of time it takes that out in my view okay well let’s break this down because you I mean you mentioned a little bit about obviously what’s happening uh you recently tweeted and we’re going to show

This tweet WTI appears to an elevated threat of chasing natural gas back to the bare Market that preceded the biggest liquidity pump in history in Russia’s invasion of Ukraine I’m curious as we kind of look at the analysis of this break down for the audience exactly

What you mean here and what you see Happening Here so first let’s give an analogy of past performance is not indicative of future um returns but I was in the trading pits in the 90s when Saddam Hussein invaded Kuwait KGO went from 20 to 40 back down

To 20 it Bott him around 10 maybe five years later and took 13 years above that height I see parallels the key thing to remember is what it did it take for WTI to get above 100 in 2022 now was not only the biggest liquidity pump in history Bar None was also Russian’s

Invasion of Ukraine that’s a sign significant Peak questions how long it lasts and it was lower high than the high in 2008 which is around $147 a barrel last year as 130 and the total the pendulum swing in Crudo is normal it swings too high and it swings too low so

Right now we’re clearly on that lower trajectory the key question you have to ask yourself is what stops it from doing what normally has from the last since 2008 is boming around $40 a barrel I don’t see a lot you just have to watch China every day look at the Chinese

Stock market yes it’s probably going to bounce it’s extremely over so but what’s changed from a year ago Jeremy is that tilt towards a recovery in China has gone towards completely opposite everybody’s understanding it’s potentially following the path that Japan and the Soviet Union former Soviet Union followed about 30 years ago so

That’s a pretty significant Bears factor and then it’s the mass most significant factor of Commodities as the farmer say it’s the high price cure and you’re seeing that now virtually all the supply estimate rions in petroleum liquid fuel crude o most notably from Canada and us are upward to records and the demand

Rision for Global GDP are downward now you also see that in grains massive supplying grains on the back of that high price cure so the key thing I enjoyed writing about two years ago when this Invasion happened was be aware this is going to kick into the high price

Cure and I think it’s going to show that that supply and demand elasticity is stronger whatever so right now we’re in that downward Bend tilt in all Commodities crud oil just kind of lagging things like natural gas and I asked myself what’s going to stop and I think the key thing that might

Accelerate it just a little bit of pullback in this record setting US Stock Market that to me is the biggest risk we K towards a deflationary recession yeah and I mean it’s been such an interesting 2024 so far H let’s go back to your technical analysis because of course you

Suggest that the WTI Crude oil could Trend towards that $40 Mark tell us a little bit about what your projection is here when you think that’s going to happen and a little bit about the factors leading to that so I I I have to be careful when I write for Bloomberg

When I speak I say I think it’s going to go to $40 level that’s the level I expected to go to I think it going be kind of strange if it doesn’t but would be very unusual if it sustains above 90 or $100 a barrel because we see what

Happens when that it does it shuts down Global economies it restricts uh demand it pumps up Supply and it makes central banks tighten more that’s the big problem and as you can see on a technical chart it hasn’t been able to sustain above let look at WTI above 90

Since 2014 except for that major aberration 2022 yet it’s been low 40 three times point is lower lows and lower highs that’s a technical Outlook and then I look at fundamentally give me a good reason for not to not to do that I see it tilting potentially with China

And a good leading indicator has been us natural gas us natural gas is an M1 Benchmark for heat electricity and fertilizer in its country and the price we’re seeing on the screen right now about $250 was first traded 1990 it shows a severe deflationary forges from from Commodities particularly for a net

Exporter that might have a problem exporting more of it and that’s the US and Canada pretty sign I I’ll leave with this I’ll end with this in 2008 when crud oil Peak the US was net importer of 11 million barrels a day about that now with Canada US is a net exporter about

Six million barrels a day including liquid fuels ethanol things like that right yeah and we’re seeing this LG ban take place obviously in the US as well Joe Biden talking about this what implications is this going to have for the for the market down south um so Supply would become

Bottleneck I mean the key thing is that’s kind of more Sensational there’s a lot of LG plants that are in the works still right but the bottom line is also we have to look at um our former president Trump who’s leading the polls and drill it will potential the market

Started pricing some of that which means crud all 50 is expensive he gets fre elected so every day that goes by that he goes in leads up in the polls we see it there’s significant deflation there and and let also just think if we don’t have that

It’s also it’s the pre-existing Trend if we get another um a second term PR President Biden so right now the Market’s got to start factoring all these things I keep asking myself what stops his trajectory and I can tell you one that would accelerate and that’s the

US Stock Market so the point is um the S&P 500 right now is up about 3% on the year it’s only January typically the best year it you know averages eight to N9 to 10% so we’re already a third there what more is there to do it’s can it

Lift that boat but if it tilts lower that’s a severe deflationary domino effect that I’m wor worried about I think the Market’s starting to figure out those rates right and I mean we’re going into an election year as you pointed out traditionally historically no one wants a bad economy going into

These election years do you anticipate anything happening here that we should be looking out for well um the the key thing I’ll point out is these are the pre-existing Trends the biggest risk as everybody tells me is that everybody is going to be wrong like at the a year ago was all consed

Recession I was wrong that but I was right in a few things about Commodities going lower the thing is right now we’ve tilted so far towards the the significant is that it’s just assumed we’re gonna have bu soft Landing in this country that Europe’s technically in session China’s significant fiscal monitor

Calist to not go into recession if we just get that little tilt downward to me that’s the iteration that’s not priced in the market even close to yet so I look at as a EXC commodity Trader now I’m just a strategist ex- money manager that what’s the risk this year is we

Just get a little tilt backward of this extreme sentiment that has swung you know 180 for last year at this time yeah absolutely we’ll keep an eye on that let’s switch over a little bit and talk about the relationship between Bitcoin and gold now you’ve noted Bitcoin underperforming compared to gold as a

Risk asset indicator I’m curious Mike I mean as we head into 2024 what are the implications of this trend for investors the key fact I like to point out with all the this I would say hype around physical ETFs in the US which have been no problem in Canada um is the

Fact of underperformance lately I love to watch the Bitcoin to gold ratio because it shows to me it’s the most significant new digital asset in on the planet with versus The Old Guard but that ratio in the past has led beta has led the S&P 500 but since 2021 since the

Biggest Li liquidity pump in history Bitcoin to gold ratio been lagging the S&P 500 so now we have this a little bit of this crocodile job pattern Bitcoin to Gold has been kind of trading lower recently and stock market’s taking up off so I’m concerned that I’ll be on the

List I think this year this is the year that Gold’s going outperform Bitcoin as we head towards a normal recession in the US and partly because the key thing to remember is Bitcoin basically and it’s all its history even last year if you look at last year last 10 years on a

Quarterly basis has about a three B to the S&P 500 what that means is every time the S&P 500 goes up by 10% is to our viewers to let know Bitcoin goes up about 30% so the problem is it’s a high volatility very speculative asset that everybody says it’s supposed to keep

Going higher but I look at it is if the stock market goes up Bitcoin should outperform but it hasn’t shown its ability really to not underperform if the stock market goes down and I think it potentially might lead that this year that’s is the risk yeah I mean we see it

Almost evening out now with the volatility in terms of the spot ETFs you referenc and the inflows and the outflows any calls any outlooks on what Bitcoin could possibly do this year uh well I have to be careful that it seems like it’s pretty comfortable um

Around this level of 43,000 key thing to remember about the trade the trade for the ETF launch last year was um the great scale Bitcoin trust that was up about 400% okay that trade’s done it’s over the discounts gone so maybe ethereum w’t happen with the same thing

In ethereum but I look at it now as I’m look at more as a leading indicator and I want to see this leading indicator prove that um the stock market continue to make record highs I think the risk is bitcoin’s still down over a third from

Its highs right that it it’s showing us that till we’ve seen Global recession here trajector from Commodities I mean versally most Commodities down and gold up is a recession year trajectory and the expectations ter things like the very inverted y curve and then this course this impatience Factor we all

Expected it last year didn’t happen but we are in the midst of some of the most significant money pumping than dumping things ever and then of course what’s really kept the US Stock Market and US economy tilted stronger was a significant unprecedented deficit spending during a uh absent the

Recession World War yeah so much money going into the market uh lastly obviously let’s get back to Gold I’m curious about your long-term perspective here uh is there any trends that we should be watch watching in the precious metals Market that we should be you know looking for considering the global push

Towards sustainability and Technology I mean is there anything that we should be really on the market for looking at for this year ETF flows so um first of all let’s put it this way the deepest pockets on the planet are buying gold right central banks and there’s a war

Going on there’s a little history there with Wars and the price of gold we don’t have to get into that but um the way I like to see gold is I like I’ve been saying for years is gold to me kind of naked if it doesn’t have some of that

Digital gold in that space it’s just where the world’s going the fact is that ETF outflows total known ETF outflows in Gold have been down significantly despite gold making record highs that’s never happened now ETF started in 2004 so 20 years of these of this data and I

Think what’s going to happen at some point those ETF flows will tilt to positive but there’s a reason not to buy gold there’s a Rec that in US Stock Market in 5% rates and t- Bs once that changes to me that’s where it’s a pretty significant buoyancy factor for gold so

Way I see it right now gold might get below 2,000 that was old resistance that held for three years but I see it building a base and at some point it’s just going to take a a leap towards 3,000 and a key Catalyst for that will

Be if and or when we finally get this normal pullback in its US Stock Market for us recession the problem is US Stock Market Rel to the rest of the world so expensive I think that’s what gold is anticipating and so to me it’s um the one commodity I still remain quite

Bullish and I’m glad we got went there because for commodity people you want to talk about bullish things and I’m kind of get talking bearish about everything else yeah yeah absolutely I mean you mentioned it central banks are buying I mean we’re seeing the buying power in

China yet it doesn’t seem anything is really tipping up on that scale so 3,000 gold this year what’s your forecast well I don’t know exactly when right to me that’s going to be the Tilt is the key Catalyst will be is once people realize yes it’s not going to be just the normal

20% in the in the correction in the stock market and the FED will save you that’s worked since 2011 like a charm at some point that has to give back a little um and particularly now that us Equity Market versus things like GDP are about the highest since the 1930s

There’s so many reasons there to see that the will be the Savior but I look at it um is it’s it needs that tilt right now they like I the quote I like to use is why by gold when the P 500s that making record highs and you can get

5% in US T yeah no I get it but the smart money seems to be going in there uh Before I Let You Go my com comments on Silver as well I mean you know the little the step sibling that seems to never quite really do what gold does

What’s your thoughts on this year leverage gold is what it used to be called it still is that the the the issue is Silvers at some point it’ll break out higher but I think it’s more um closely coordinated with Industrial Metals now copper nickel and aluminum

Um and the fear I has industrial metal decline which is like 17% at one year basis will continue as the world heads towards recession gold will outperform and silver stuck in the middle so between 21 and 26 an ounce some point it’ll break out but I I’m fearful it’s

More likely to trade lower like I expect copper heads more towards $3 a pound initially um and that’d be pressure on Silver um and like I said I’m Fort I still see gold as for I don’t know how years in a row is probably one of the best performing Commodities most notely

Versus um industrial medals and silver is now much more of industrial metal than it used to be and by the way I’ll end with this central banks aren’t buying silver exactly yeah just seems like they’re dipping their toes into this gold market doesn’t it well it’s it’s somewhat historic I

Just like the I love the world Golds council’s data on that and there’s have there’s ever been in a my lifetime a better reason and I say absolutely there probably hasn’t been and there’s one unique Factor about what central banks can do we know the M suspects are China

And Russia is they can print viat money and buy physical gold with that now at some point they might buy Bitcoin but right now it’s gold yeah no and the adoption is actually happening and taking place quicker too uh Mike it’s great to have you with us today to break

It all down I appreciate you coming on thank you Mike mclo Senior commodity strategist at Bloomberg intelligence joining us thanks again thanks TR and thanks everyone for tuning in I’m Jeremy saffron with kit Cod news don’t forget to subscribe to our channel for the latest breaking news and we’ll see you next Time