June 4, 2025
Energy consultant Art Berman has written an article on the challenges of forecasting oil markets: https://www.artberman.com/blog/why-analysts-misjudge-oils-future
Here’s a breakdown of energy consultant Art Berman’s key arguments:
I. Challenging the Dominant Bearish Consensus:
- Cracks in the Glut Narrative: The widespread view of persistent oil oversupply into 2026 is starting to weaken.
- Goldman Sachs Shift: A significant shift in the consensus occurred, with Goldman Sachs now forecasting strong demand, constrained supply, and the market absorbing OPEC+ barrels without a surplus.
- Analyst Skepticism: Berman has always been skeptical of the consensus, citing analysts’ history of missing turning points by favoring simple narratives over complex realities.
- Consensus View Summarized:
- Steady move towards oversupply.
- Driven by stagnating demand and robust OPEC/non-OPEC supply.
- Based on slow global growth, structural shifts in consumption, and lenient policies that enable supply.
- Predicts low prices ($58-60 avg WTI 2025, $55-60 avg 2026).
II. Art Berman’s Alternative View (Balanced/Tight with Upside Risk):
5. Higher Price Forecast: Leans towards $66 average WTI in 2025 and $68 in 2026.
6. Unstable Path Ahead: Expects volatile prices, not a smooth curve, due to the “push-pull” between:
- Restrained Supply: Market is fundamentally tight (comparative inventories at major deficits, blended OPEC-EIA forecast shows near balance/small deficits).
- Mounting Geopolitical Risk: A world defined by fracturing, volatility, and multiple conflict zones (Ukraine, Middle East, Taiwan).
7. Current Market Dysfunction (Underpriced):
- Oil is underpriced by approximately $10 per barrel.
- The comparative inventory deficit is near 25-year highs (excluding the Ukraine war), yet prices are at late-COVID lows.
- This reflects a “historically negative price-discovery excursion” driven by deep confusion and uncertainty, freezing investment decisions.
III. Critique of Conventional Models & Frameworks:
8. Obsolete Models: Traditional forecasting tools are built on the assumption of stable globalization (predictable trade, coordinated policy, and integrated markets) that no longer holds.
9. Ignoring Fractured Reality: Models fail to price in “erratic government behavior, fragile trade flows, and rising geopolitical volatility.”
10. Narrow Focus Misleading: An obsession with when OPEC+ barrels return overlooks the cartel’s fundamental role as an instrument of geopolitical and economic power in a volatile world. The return is a strategic reset, not a failure of discipline.
11. Misreading the Era: Much analysis wrongly assumes a return to the stable 2010s pre-Covid/pre-Ukraine invasion world. We are in the early stages of a “new Cold War” defined by economic statecraft (tariffs, sanctions) and deep geopolitical fault lines.
IV. Evidence Supporting a Tight/Balanced Market:
12. Blended OPEC-EIA Forecast: Shows a broadly balanced market through 2025/2026, with small deficits (-0.25 mmb/d) in 2H 2025 & 2H 2026, and a max surplus of only 0.33 mmb/d in 2Q 2026. Indicates a “precarious balance,” making the market highly sensitive.
13. Comparative Inventory Analysis:
* The stable pre-2023 relationship between price and inventory has broken down.
* Price volatility in 2025 rivals the Covid collapse, but stems from chronic systemic uncertainty, not a single shock.
* Low inventories offer no cushion, leading to large price swings in response to any shock.
14. Systemic Shocks Reshaping the Market: COVID-19 and the Ukraine War were not isolated events, but rather marked the “unraveling of the post-Cold War order,” creating lasting fragility and volatility.
V. Geopolitical Risks & Asymmetric Upside:
15. Geopolitical Powder Keg: Multiple active conflicts and tensions (Iran, Israel/Hamas, Houthis, Syria, Ukraine, China/Taiwan, European paralysis) threaten energy security.
16. High Sensitivity in Tight Market: In a fundamentally tight market, even small disruptions can have large price impacts due to the lack of buffer inventory and systemic fragility.
17. Asymmetric Risk: The bearish view might hold in the very near term, but the path ahead is “jagged.” The analyst sees significantly more upside price risk than downside risk, far beyond what most analysts acknowledge.
A different perspective
As I see it, Trump’s renewed global trade war—more aggressive and comprehensive than earlier tariffs—could amplify the oil market uncertainties outlined by Art Berman in ways he only touches on indirectly. Here’s how:
Impact of Trump’s Trade War vs. Berman’s Analysis
1. Amplified Demand Destruction (More Than Berman Assumes)
- Tariffs = Slower Global Growth: Trump’s tariffs would likely impact China, Japan, the EU, and other major economies significantly, reducing industrial activity and oil demand.
- Berman assumes some demand fragility, but not the kind of synchronized slowdown that aggressive global tariffs might cause.
- Worse-than-expected slowdown in Asia and Europe could invalidate even his modestly bullish demand forecasts.
2. Supply Chain Shocks > Energy Supply Disruptions
- Oil-intensive supply chains (e.g., petrochemicals, shipping, logistics) may become uneconomical or rerouted.
- Retaliatory tariffs could impact US LNG, refined product exports, or even erode global refining margins, potentially reducing crude throughput.
3. Stronger Dollar Pressure = Oil Price Headwind
- Trade wars usually strengthen the USD, especially if capital flows to the US as a perceived safe haven.
- A strong dollar tends to suppress oil prices, all else equal—countering Berman’s $66–68/bbl forecast even if supply remains tight.
4. Reordering of Global Alliances → Strategic Oil Realignment
- Trump’s America First posture could:
- Alienate Gulf allies (e.g., Saudi Arabia, UAE) → less coordination with the US.
- Accelerate the China–Russia–Iran axis, increasing non-dollar oil trade.
- These moves would undermine current pricing structures, making price discovery even more dysfunctional than Berman suggests.
5. Inflationary Ripple → Central Bank Tightening
- Tariffs raise import costs → stoke inflation → delay rate cuts or provoke more hikes.
- It could weigh on risk assets and indirectly suppress oil demand.
- Berman’s analysis doesn’t include policy-driven demand tightening through monetary response to trade inflation.
Summary (Point Form)
- Berman’s thesis: The Oil market is tight, mispriced, and vulnerable to shocks. Price upside is likely.
- Trump’s trade war adds:
- Deeper demand hits from a global slowdown.
- Greater price volatility from supply chain frictions.
- USD headwind to oil pricing.
- Disruption of geopolitical energy alliances.
- Monetary tightening due to tariff-driven inflation.
Net Impact:
Trump’s trade war likely undercuts oil demand forecasts more than Berman accounts for, but also adds new geopolitical price shocks. The market could become even more volatile, bifurcated, and mispriced, especially in the short term.