Oil Supply Recovery Slower Than Expected, CIBC Trader Says
CIBC Private Wealth's Rebecca Babin warns that oil supply recovery is overestimated, expecting prices to settle between $75 and $80 per barrel by year-end.
Oil supply is not expected to return to the market as quickly as many traders anticipate, according to Rebecca Babin, Senior Equity Trader at CIBC Private Wealth. Speaking on Bloomberg Surveillance, Babin argued that the market is overestimating the pace of production recovery, which could keep prices supported in the near term. This caution comes amid OPEC+'s ongoing management of spare capacity, which remains concentrated in Saudi Arabia and the UAE, with estimates of over 5 million barrels per day of idle output. However, the cartel's coordinated approach with Russia has historically prioritized price stability over rapid output increases, suggesting a measured return of supply. Additionally, the Brent-WTI spread has narrowed recently, reflecting differing regional dynamics, with US production constrained by Permian Basin bottlenecks and higher drilling costs.
Babin's view challenges the prevailing optimism that supply constraints will ease rapidly, a factor that has weighed on crude prices recently. If production indeed lags expectations, the supply-demand balance could tighten, providing a floor under oil prices. This scenario is further supported by crack-spread economics, where refining margins for gasoline and diesel have remained robust, incentivizing crude runs but not necessarily boosting supply. Meanwhile, China's marginal demand, as the world's top crude importer, has shown signs of slowing amid economic headwinds, but any pickup could quickly absorb available barrels. The US Strategic Petroleum Reserve (SPR) stands at roughly 375 million barrels, its lowest since the 1980s, limiting the government's ability to intervene in case of price spikes. For traders tracking real-time fuel quotes, NowPrice offers the latest updates on crude and refined product prices to navigate this uncertainty.
Looking ahead, Babin forecasts West Texas Intermediate crude to settle between $75 and $80 per barrel by the end of the year. Key data to watch include weekly US inventory reports and OPEC+ production decisions, which will clarify the actual pace of supply recovery. Market structure also warrants attention: if the futures curve shifts from backwardation to contango, it could signal oversupply, but current backwardation suggests near-term tightness. Traders should monitor the next OPEC+ meeting in June for any deviation from the planned gradual unwinding of cuts, as well as US crude stockpile draws, which have averaged 2 million barrels per week recently. Any surprise in these data points could trigger volatility, making NowPrice an essential tool for staying ahead of market moves.