BofA’s Blanch Sees Oil Lower in 2H as Inventories Build

Oil Market Analysis - The oil market is currently supported by seasonal summer demand, but lower prices are expected in the second half of the year due to inventory builds outside of China [2] - China holds almost 40% of global crude oil stocks and is expected to continue building inventories, influencing global oil prices [3][4] - A surplus of nearly 200 million barrels is anticipated, eventually impacting the Atlantic basin, the US, and Europe, leading to price decreases [4] - US rig count is down 15%, indicating a potential decrease in US oil production [5] - Geopolitics and supply-demand dynamics will prevent oil prices from crashing despite potential price decreases [6] Energy Demand & Transition - Texan power demand is up 55% year-on-year, highlighting significant energy demand in specific regions [7] - Renewables and natural gas are expected to drive the majority of energy demand in the next few years, with oil taking longer to be significantly impacted [8] - Big tech companies are prioritizing securing any power source available, including renewables and nuclear, to meet growing energy demands [10][11] - The US faces a capacity problem and needs to build more power plants, while Europe has capacity due to reduced energy consumption [12] Geopolitical Factors - Europe's ban on Russian oil imports is tightening the diesel market, potentially causing more stress and supply tensions [13][14] - Europe still purchases 50% of its gas directly from Russia, making it difficult to completely cut its dependency [15] - Europe's efforts to reduce reliance on Russian energy are negatively impacting European industry [16] Gold Market Outlook - The industry is bullish on gold, expecting it to reach around $4,000 per ounce in the next 12 months [18][19] - Gold's price increase has been primarily driven by central bank activity, requiring increased investor demand for further gains [19] - Lower interest rates, particularly due to political pressure on the Federal Reserve, are expected to trigger higher gold prices [20][22] - Jewelry demand for gold is down 20% year-on-year, with other precious metals like silver, platinum, and palladium benefiting more from the upside pressure [20]