WTI Predicted to Fall to $40 a Barrel

Mike McGlone argues that high oil prices accelerate superabundance trends in Western Hemisphere supply (US/Canada surplus ~7mb/d, heading to 10mb/d by 2028). Technology increases supply elasticity and reduces demand. He expects oil to revert to ~$40/barrel, gold to be rangebound after peaking in Q1, and broader commodity/stock market weakness in H2 2024.

implicit

explicit

USD

agricultural commodities cautious down

Bloomberg Research 7.0
Financial Media
Mike McGlone 7.0

WTI Predicted to Fall to $40 a Barrel

WTI

WTI → 40
US gasoline (avg) → 2.9

metals

Gold put in a pretty significant high back in Q1 and is probably going to be stuck in a range for years.

ndx

McGlone states 'almost every time you have swings in crude oil it happens with the stock market going down' and 'if we get a little dip for a normal midterm year, that means everything goes down.'

rut

Same reasoning as NDX - broad stock market weakness implied for H2, small caps typically more vulnerable in downturns.

wti

Key way we get there is by pumping prices up too much... on a normal cycle it goes back to 40.

yields

McGlone includes 'potentially U.S. Treasury bond yields' in the list of assets that had pumps and dumps and will continue to go lower in H2.

Host (speaker1)

Introduces McGlone's note on superabundance trends and asks about his forecast of $40/barrel WTI.
Mike McGlone

Key way to $40 oil is by pumping prices up too much, accelerating superabundance in Western Hemisphere. US/Canada surplus ~7mb/d, heading to 10mb/d by 2028 if prices don't go lower. Superabundance is bad for prices.
Host (speaker3)

Questions why oil markets are confident prices will drop when Strait traffic isn't back to pre-war levels.
Mike McGlone

Bull markets in commodities increase elasticity. OPEC becoming redundant (UAE left, Iraq threatens to leave). Trump's 'drill, baby, drill' accelerated globally (Venezuela, US, Canada, UAE, Iraq). Technology creates more supply and reduces demand.
Host (speaker1)

Asks about President's comments on gasoline prices and investigation into gas companies.
Mike McGlone

If President wants investigation, start with futures traders. Retail prices are spot on with wholesale gasoline going lower, but there's a lag. Prices will go back to pre-war levels (~$2.90/gal) by midterms, from current $3.90.
Host (speaker3)

Asks about gold's six-month run, dip below $4000/oz, silver dropping, and impact of rising interest rates.
Mike McGlone

Gold started going back down because it went up too much. Gold reached highest ever vs Bloomberg Commodity Index, 40-year high vs 16-month moving average, and lowest vs Treasury market since early 1980s. Gold put in significant high in Q1 and will be rangebound for years.
Host (speaker1)

Asks what the President wants regarding energy prices, referencing McGlone's rhetorical question.
Mike McGlone

Oil prices will not stay up, they will go down. President is leader of world's largest energy producer/exporter and needs prices down because inflation and affordability are top issues.

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