Interview, Fireside Chat
Why oil and gold prices could keep rising
- Short-term geopolitical risks are skewed upside due to Middle East supply disruption possibilities and speculative positioning in the lowest 1% of history, with a potential 2 million barrels per day disruption from Iran for two quarters potentially driving Brent to the mid-90s if OPEC fails to offset losses, though historically Saudi Arabia and the UAE offset 80% of such supply within two quarters.
- A closure of the Strait of Hormuz could push oil prices into triple digits despite the unlikelihood of such an event due to rational economic interests, while OPEC+ production increases historically lag behind supply drops, leading to tighter markets until rebalancing occurs.
- Oil demand forecasts anticipate negative growth in developed markets due to EV rollouts, contrasting with positive growth in the U.S. and broader OECD, alongside China's stimulus-driven demand growth of 200 KBD next year, which remains 2–3 times slower than pre-pandemic averages and adds only 40 basis points to growth.
- The baseline Brent price outlook remains between 70 and 85, with a specific 2025 forecast of 70 to 76, though long-term downside risks exist to the low 60s due to high spare capacity and potential trade tariffs impacting global GDP.
- Refining margins are expected to widen as the global refining system remains tight relative to crude production, while Fed cuts and a potential Chinese easing cycle are anticipated to support oil demand and create a cyclical boost for gold via lower opportunity costs.
- Gold is forecast to reach 2,900 per troy ounce by early next year, driven by central bank reserve diversification and monetary easing, and is viewed as a broader hedge than oil against macro scenarios including trade tensions, fiscal easing, and presidential influence on policy.
- Long-term upside to oil prices is limited by high spare capacity, whereas downside risks for 2025 include trade tariffs and negative global demand impacts, while the "China policy put" may accelerate the shift toward green metals like copper over oil.