With geopolitical risk premiums gone, Canadian expert Eric Nuttall predicts a bullish future for oil markets
Eric Nuttall, a partner at Ninepoint Partners and a Canadian portfolio manager bullish on the energy sector, reported to BNN Bloomberg that oil prices are currently at about two-month lows.
This decline, he notes, is due to the removal of geopolitical risk premiums from the pricing, which is beneficial for energy investors.
Nuttall explained, “What we've had is the removal of any geopolitical risk premium that was in the price, which honestly, for energy investors, is a good thing.”
“You don't want to have a large premium because then you’re always worried about headline risk and if some peace treaty comes to pass and oil falls five dollars. So, when we look at price relative to global oil inventories, we can now say that there is no risk premium,” Nuttal continued.
Despite ongoing tensions in Eastern Europe and the Middle East, he stated that the energy markets are significantly less concerned about major disruptions to the global oil supply.
However, Nuttall anticipates oil prices will rise in the coming months due to seasonal demand increases during the summertime and historically low global oil inventories by year's end, supporting an oil price around US$85 to US$90.
Looking ahead, Nuttall highlighted the upcoming OPEC+ meeting in June, where the organization's member states are sending mixed signals about their supply quota plans.
Russia’s Deputy Prime Minister Alexander Novak mentioned that OPEC+ is considering the possibility of increasing oil output among other options, but Nuttall remarked that the organization’s strategies won't be clear until the meeting occurs.
Nuttall described the dynamics of OPEC+ meetings, noting, “There's always dramatics heading into any significant OPEC+ meeting… you typically will see trial balloons released… I don't think they've made up their mind. They typically don't until the event actually takes place.”
“From my perspective, I think you'll see the continuation of them being pre-emptive, precautionary, and proactive in terms of managing oil supply.”
He further clarified that OPEC+ is likely to keep a significant amount of oil off the market, waiting for demand levels to justify their reintroduction rather than actively pushing more barrels into circulation.
Nuttall believes that allowing the market to pull barrels rather than pushing them ensures stability in pricing.
He concluded with a long-term outlook, predicting, “Eventually, I think in a year's time, as the barrels are pulled from them, the market narrative is going to switch back to a shrinking OPEC+ spare capacity, insufficient investment, and a very, very bullish outlook for oil in the next two to three years."
