Oil prices in 2023 will be ‘strongly in triple digits,’ analyst says

Daniel Dicker, The Energy Word Founder, joins Yahoo Finance Live to discuss the energy markets, the outlook for oil prices, and Russian oil price caps.

Video Transcript


JARED BLIKRE: Well, let's take a look at how the energy markets are doing this morning. We see crude oil, well, we'll get that in a second. There we go. We can see crude oil up about 31% basis points there. Now, we've had some warning signs over the weekend that demand and further lockdowns in China may be distorting the outlook for energy. And for a closer look at the oil markets today, we got Dan Dicker, Founder of the Energy Word. Dan, always great to see you here.

We got these price caps looming December 5th, very well telegraphed I should say, but we're not seeing that premium, any kind of premium embedded in the futures prices for oil. And lots of prices around the world showing that there seems to be adequate supply. Just wondering you're seeing the situation now, Dan.

DAN DICKER: A lot of macro effects going on, Jared. And you're right, the price caps that the Europeans are using have a lot of holes in them. It's not really clear how much of the Russian oil will be stopped from flowing and therefore, affect the supply issues that are going on in Europe. But for the most part, what's been going on in the marketplace has been sort of a trader dodge. A lot of the times, the traders have been looking at these macro kind of inputs into the oil market, and they've been making the wrong choices over and over again.

We saw, for example, after the midterms when these SPR releases would stop, and the fed spoke again about a pivot. We hear it all the time. And traders ran in and bought oil up to around $94. And that turned out to be the wrong move.

We've seen the pressure on that as oil has come down now under $80. And I think most of that is traders that are stuck long. It really doesn't have a lot to do with the fundamentals going on. And again, a huge macro situation going on, as you spoke about in Russia, and in Ukraine, and how much effect that oil ban is going to have, and the winter effect on Europe with natural gas and so forth, is working on the markets. And we have also in the United States, we have a lot of investors who are playing the opposite game having had such a bad year in tech, rotating into oil stocks. And oil stocks are now way ahead of where they should be comparative to oil prices that are now under $80.

So again, lots of macro kind of effects going on in oil. It's very kind of difficult to make a huge prediction on what's going to happen from now through the end of the year. I would say the fundamental case for oil is as strong as it's ever been, and that there is a disconnect going on between oil and oil stocks. And one would imagine that you will see going towards the end of the year that kind of disconnect is sort of close itself in, and therefore, you expect to see, or at least I expect to see oil rally again towards $90, while oil stocks in fact, start to moderate as some of the enthusiasm for the sector starts to fade a little going into the end of the year.

JARED BLIKRE: And Dan, where do you see OPEC plus fitting into this? I believe it was about a week ago we got a headline subsequently refuted, disavowed that the OPEC plus might be raising its production capacity by 500,000 barrels. So is that even a possibility when we're talking about the next meeting, which I believe is at the beginning of December, and then we'll have another one at the beginning of January?

DAN DICKER: The Russians are stuck, Jared. The Russians are really stuck. I mean, they're losing on the battlefield. They're losing in the economic world with the oil ban. So they have been pushing very hard on OPEC to start increasing supply quotas. So there is this kind of push coming from the Russian side of OPEC plus to make these increases. But the Saudis, MBF, and the UAE, and all of the other members of the Arab side of OPEC very much want to keep the production numbers down. It's worked very well in their favor.

And with oil prices in fact, going under $80, they will push very hard against any kind of production increases at this point. So they want to see these surpluses come out of the market. They've been seeing these surpluses come out. They don't want to do anything to stop that trend going forward. And I don't think we're going to see any production increases over the course of the next several meetings.

BRIAN SOZZI: Dan, Morgan Stanley out this morning cutting their oil price forecast by $5 to $95 for the first quarter of next year. That's considerably higher than current levels. What has to happen for a price like that to be hit?

DAN DICKER: I mean, the fundamentals are really strong, Brian. I mean, we've seen the traders get stuck long here. I mean, but that to me is a very short-term move. Oil stocks are representing Exxon at $114, or EOG at 145 is representing oil in the triple digits. I mean, that's what it's kind of representing.

So one of the fundamentals here is wrong. Either oil stocks are way overpriced, or oil itself is way underpriced. So again, these macro thoughts keep on running through the market. Will we have a soft landing? Will there be a big recession? How much will the Fed in terms of their rate cuts, how much will they get more dovish as time goes on, let some of the effects of their last couple of cuts go through?

They're so macro here that in the end, what I look at, what I try to look at is trying to remove some of these macro things and take a much longer view. And from a fundamental point of view, look, supply is way down. And if we manage a soft landing of any kind, demand is going to strip that so hard. And that would indicate to me that oil prices in '23 at some point are going to be triple digits, and strongly at triple digits.

Now, they may have gotten ahead of themselves at various points during the cycle here in '22. But if you're investing long-term, you're looking for some of the value numbers to come back in the oil stocks and to get some at a decent price, they're not there right now. I mean, there's too much rotation going on. But I see oil prices absolutely seeing triple digits in '23, and strongly so, probably 115, 120 some time in the late spring, early summer.

JARED BLIKRE: All right. We love predictions here at Yahoo Finance. So thank you for that. Dan Dicker, the Energy Word Founder.