Oil Supply Won't Come Back as Quickly as Expected, Babin Says

12/18/2025 2:40:20 PM	medium term down	20 days later	+1.94%	-1.94%

Rebecca Babin holds a contrarian view that oil prices may not decline as much as the market expects.

Host

Rebecca Babin

The market is pricing in a smooth, rapid return of disrupted supply and no demand recovery, which is overly optimistic on supply and too pessimistic on demand.

Morgan Stanley's price cuts still leave targets above the strip. The market has already priced in all supply coming back evenly and demand not rebounding, but supply restorations have been uneven and demand from China may rebound as they roll back export bans.

Where does Babin see oil prices by end of year?

Host

Rebecca Babin

Year-end targets: WTI $75, Brent $80. The market is pricing 85% of flows resuming by end of July, which may be too aggressive.

If the flow resumption gets pushed out, inventory builds won't accelerate as much as anticipated. Risk/reward favors upside at current prices.

What about the conventional wisdom of a glut in 2027?

Host

Rebecca Babin

2027 surplus estimates of ~4 million b/d may be partially absorbed by strategic inventory rebuilding in India and China, preventing a price crash to $60s.

India plans to increase SPRs and diversify away from Middle Eastern crude. China has stockpile rebuilding to do. This could keep prices around $70-75 rather than falling to $60-65.

What impact have OFAC waivers had on the oil market?

Host

Rebecca Babin

OFAC waivers allow Iranian crude to flow freely at market prices, making it a competitive barrel that pressures prompt prices lower.

Iranian crude previously traded at a discount due to sanctions; now it's a free-floating barrel. This has contributed to prompt weakness, but the waivers are only 60 days and may be reimposed.

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