A commodities expert expects the price of oil to fall as energy producers ramp up supply while countries around the world brace for less severe tariffs from U.S President Donald Trump‘s administration.
Rob Thummel, senior portfolio manager and managing director at Tortoise Capital says oil prices are down a little bit but have seen a slight increase as a result of an improved global economic outlook.
“They’re about flat today, maybe down just a little bit, but we’ve seen a nice little rise in the oil price over the last couple of weeks as a result of an improving outlook for the global economy tied to probably a less, I guess, less tariffs than really were expected in the long run,” Thummel told BNNBloomberg.ca in a Monday interview.
West Texas Intermediate (WTI) crude was hovering above US$67 a barrel in early afternoon trading on Monday while Brent crude was trading just above $68.
The Organization of Petroleum Exporting Countries (OPEC) agreed to provide more than 500,000 additional barrels per day around global markets in August, in a bid to regain market share lost to other oil producers.
“The global oil market is oversupplied right now,” said Thummel. “It’s going to be oversupplied for the second, half of the year, because OPEC+ is bringing back oil volumes back to the market. They’ve accelerated the pace at which they’re unwinding some of their previous cuts, and that’s going to result in an oversupplied oil market. And typically, when you have an oversupplied oil market, inventories rise, and then prices fall, and that’s exactly what we’ve seen.”
The Strait of Hormuz, a sea passageway for large volumes of crude, was under threat of closure during the conflict between Iran and Israel. After the U.S. military strikes on three nuclear strikes, the dispute came to an end after the Americans brokered a deal between the two Middle East countries effectively ending tensions.
“The biggest geopolitical risk to focus on still is Iran and the Strait of Hormuz, and any implications of a closure of the Strait of Hormuz, which we don’t think is going to happen, or just a lowering of the export volumes that come out of Iran on a daily basis that could, you know, cause oil prices to rise,” said Thummel. “But right now, we don’t see any of those geopolitical risks really rising that high.”
About 20 million barrels of oil per day, or around 20 per cent of the world’s oil passed through the strait in 2024.
‘Accelerated electricity growth’
The expected drop in oil prices comes as the demand for electricity surges. Thummel said there has been flat electricity demand for the last 20 years but that is changing.
“AI changed the game,” said Thummel. “We’re going to now start to have accelerated electricity growth in the U.S. and probably Canada, and likely globally and so that’s why we think electricity is the new oil. It’s going to be the growth driver going forward and there are a lot of opportunities as a result of that.”
Canada’s electricity demand is projected to significantly increase in the coming years, potentially more than doubling in the next 25 years, according to Canada Energy Regulator. The growth is driven by population increase, electrification of the economy, including electric vehicles and industrial processes, and the need to replace aging infrastructure.
Thummel says there is going to be massive electricity demand over the next several decades tied to AI, industrialization, manufacturing and EVs.
“All of these captured together, are really going to expand the amount of electricity demand dramatically,” said Thummel. “It could be over 1000 terawatt hours of electricity.”
“It’s a massive amount of electricity that’s going to be needed to be generated really, not just in the next decade, but really in the next five or six years,” said Thummel. “And so that’s why we’re so excited about it Tortoise, and it creates opportunities to invest in natural gas, nuclear, because those two are going to really be the primary fuel source just to generate this electricity going forward.”
