‘The sky is falling’ sentiment around oil markets was tempered Dec. 3 as an upcoming OPEC meeting set for Dec. 5 seems increasingly less likely to lead to Saudi Arabia opening up the oil spigots.

Oil futures were up for first-quarter 2025 after a Thanksgiving week in which WTI prices undulated around $69 and $70. But while OPEC always bears watching—few will forget the November 2014 trade war aimed at crippling U.S. shale producers—the general market conditions for crude trading have, nevertheless, taken on an odd dynamic.

Chiefly, prices should be much higher, Marshall Adkins, head of energy at Raymond James, said at the recent Executive Oil Conference & Expo in Midland, Texas.

Adkins, who has worked as an analyst and banker in the oil and gas business for the past three decades, said he’s never seen a period in which there was a bigger disconnect between sentiment, pricing and market fundamentals.

“There's an overwhelming negative consensus out there right now,” Adkins said. “You just look at the strip price for crude, it's $65 for, like, ever. We're never going to get above $65.”

Bare fundamentals suggest, to him, a price point that should be far closer to $100/bbl.

And Adkins isn’t buying the prevailing wisdom that weakening Chinese oil demand, EV encroachment, rising supply from non-OPEC countries and a potential Saudi price war are in the making—or even a legitimate threat.

In part, Adkins pinned some of the disconnect between price and physical realities on “paper players in the crude market,” referring to trading algorithms.

Commodity trade accounts (CTA), he said, now drive more than 80% of all oil trading. CTAs are programmed to buy and sell based on key trading metrics such as momentum and technicals and now far outnumber physical players. 

CTAs are “machines that are programmed to buy and sell at certain technical points or whatever the formulas that they use to program,” he said. “So the game's changed for what's driving oil prices. [It’s] not just fundamentals anymore.”

A major talking point Adkins hears is that inventories are bloated and that supply has outstripped demand.

Adkins said the reality is starkly different: Since May, global oil inventories are down by more than 160 MMbbl.


“Inventories have been falling. We're in an undersupplied oil market. That's just the facts,” Adkins said.

Still the futures market seems stuck on $65/bbl oil prices. Adkins explained why, and why he thinks the sentiment is dead wrong.

The Saudi theorem

A key fear is the Saudi theory, which posits that the kingdom is considering a trade war to win back market share, punish U.S. producers or some other competitors.

None of those motivations make sense from an economics perspective, Adkins said. In the past 18 months after Saudi took 1 MMbbl/d off of the market, the country has realized an additional $150 billion to $200 billion in revenues.

“If you are running a company and you could take 10% of your supply offline and massively increase your cash flows, are you going to decide to do that [increase supply]? Oh, you mean work less and make more? Sure, sign me up for it.”

Saudi said another question is who a trade war punishes.

“If Saudi decides to take oil to $50, they probably can't. Who are they going to punish? The guys sitting in this room, the Permian Basin, you're not the problem, right? Who's the problem? Maybe Russia, Iran, one of those, but I just don't see it happening.”

Had Saudi not made its cuts, Adkins said oil would likely be $50/bbl or less.

“If they had let oil go to $50, it would've been a disaster for them,” he said. “So again, they realized a lot more revenues.”

China’s weakened economy

Adkins acknowledged that China’s economy is slowing, and with tariffs likely to be placed on the country by the incoming Trump administration, more economic woes may await them.

And there's been a corresponding push by western companies manufacturing in the country to move out and relocate to India, Thailand or other areas.

The consensus now is that China will remain down for the year with global oil demand growth of about 1 MMbbl/d, “a little subpar versus our normal 1.4, 1.5 million a day, but not a disaster.”

And elsewhere, airline traffic is up (particularly after a record Thanksgiving Day for travel), petrochemicals are up and “U.S. demand is rocking.”

“So what you are seeing is actually relatively healthy demand,” he said.

Adkins said that China will rebound as new stimulus likely stabilizes the economy in 2025. “They're not going to keep going down forever. We're already seeing signs of that starting to come back,” he said. “But what's happening is as you move that manufacturing to India or Vietnam or Malaysia, demand in those areas is growing…meaningfully.”

And, bottom line, even as China has seen decreased growth, other areas are making up for it, including India, which is tracking up by between 200,000 bbl/d and 300,000 bbl/d annually.

At the same time, non-OPEC supply growth doesn’t seem to be materializing. Adkins said that the U.S., Brazil and Norway, combined, have all been down over the past year.

Only Guyana and Canada have grown—Canada because of its new Trans Mountain Pipeline and Guyana because of the ongoing efforts by Exxon Mobil and other members of its consortium, including Hess Corp.

“So that will continue to grow. But what about the rest of the world? Brazil, U.S., Canada, Norway. We're not seeing the growth that everyone's been talking about. It's just not materializing,” he said.

EVs blunted impact

Another market concern stressing traders is the purported threat of electric vehicles to oil demand.

Adkins said that Norway is the “poster child” for the phenomena, with 95% of all vehicle sales now EVs.

What’s lost in those statistics is that internal combustion engines haven’t gone away.

“They still have their gas fired vehicles for longer trips,” he said.

Norway’s oil consumption is down less than 5% from a decade ago, Adkins said. Likewise, Norway’s gasoline is “barely down since 2020,” he said.

“Again, it's down, but it ain't down a lot and it's not falling precipitously,” he said.

“Here in the United States, we're less than 10% [EV sales] now,” Adkins said. “So are we really going to see oil demand go away? Sure, as we get more efficient, it's going to slow the growth rate, but it's not going away as the Third World starts to drive motorcycles and cars, et cetera.”

And in Europe, the epicenter of EVs? Gasoline use is going up compared to the previous decade.

Europe saw a pre-EV decline in gasoline usage due to taxes, restrictions and a switch to diesel vehicles, Adkins said. Since then, gasoline demand has been steadily rising.

“It's not going away,” Adkins said.

Saudi is also unlikely to increase supply because it has indicated its price targets is within a range of $80/bbl to $100/bbl.

A Trump presidency could shake things up, particularly if his administration takes aim at Iran, which has been accused of trying to interfere in the election and which Adkins said had reportedly wanted Trump killed.

If Trump enforces sanctions “that Biden stopped enforcing,” OPEC will likely increase production to cover the resulting deficit.

But for now, “we’re in an undersupplied oil market,” Adkins said. “That paints a pretty bullish picture going into next year.

“I don't think Saudi increases production unless we take out Iran,” he said, adding, “I think this sentiment, ugly sentiment, we see today reflects more of a bottom than anything else.”

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