Jeremy McCrea, managing director and energy research at BMO Capital Markets, joins BNN Bloomberg to provide a forecast for oil amidst global geopolitical tensions.
Oil prices remained volatile after a sharp selloff, as traders weighed escalating geopolitical risks against signs of persistent oversupply. Protests in Iran, uncertainty around Venezuela and diverging global demand forecasts have heightened investor caution, even as prices attempt to stabilize.
BNN Bloomberg spoke with Jeremy McCrea, managing director of energy research at BMO Capital Markets, about how conflicting outlooks from global agencies, production economics and geopolitical uncertainty are shaping investor sentiment in the oil sector.
Key Takeaways
- Oil prices are being pulled between geopolitical risk premiums and persistent global oversupply concerns.
- Forecasts from major agencies diverge sharply on demand growth and inventory levels through 2026 and 2027.
- OPEC remains more optimistic on demand, while the EIA projects inventory builds toward post-COVID highs.
- Marginal economics for new drilling could eventually force production declines outside OPEC, supporting prices.
- Heavy oil differentials have widened amid uncertainty around potential supply growth from Venezuela and Canada.
Jeremy McCrea, managing director and energy research at BMO Capital Markets Jeremy McCrea, managing director and energy research at BMO Capital Markets
Read the full transcript below:
ROGER: Oil edged higher today after a volatile week, with Brent trading above US$64 a barrel after plunging more than four per cent yesterday. Continued protests in Iran have led to disruptions in oil production and shipping, contributing to the drop in prices. Lorne, I want to bring you back in here to talk a little bit. We were discussing this off air. It’s been an extraordinary start to the year. In the first two weeks alone, we’ve seen what is essentially an intervention in Venezuela, where the president was seized, and ongoing threats tied to Iran.
LORNE: And seizing tankers.
ROGER: Yes, and yet nothing has really happened in terms of prices. Not a full invasion — I shouldn’t say that — but they did go in and seize the president.
LORNE: I think one thing is clear: no matter what the U.S. administration says anymore, people are so used to all kinds of things coming out of there that they don’t take a lot of it seriously. Second, the oil market fundamentals are not good. There is an oversupply of oil and only a minimal uptick in demand. Oil prices have been very weak for quite a while, and we would expect that to remain the case. Geopolitical issues can always have a big impact, but at the present time it doesn’t look like the U.S. is going to go into Iran. If it did, that would cause an uptick. But the fundamentals are not great, and you don’t want to make investments based on a geopolitical event that may or may not happen.
ROGER: When we talk about the surplus, that’s been in place for a while. How much longer can it persist?
LORNE: When we look at the data, we’re still seeing oversupply. The Trump administration has been very close to Saudi Arabia, and Saudi Arabia does not want to upset Trump. With the midterms coming up, it does not want to cut production, even though that is putting pressure on prices.
ROGER: All right, we’re going to bring in Jeremy McCrea, managing director of energy research at BMO Capital Markets. Jeremy, thanks for joining us. We had some technical issues earlier, but those are resolved.
JEREMY: Great, thanks for having me.
ROGER: Where do we stand right now with oil?
JEREMY: What a week to start the year. We’ve gone from one geopolitical event to another, from Venezuela to Iran. Heading into the weekend, there’s concern about what could happen, and there’s a lot of nervousness in the market right now.
ROGER: What concerns do you have heading into the weekend?
JEREMY: Iran never really looked like it was going to resolve this issue quickly. The immediate reaction was focused on what could potentially happen. There’s not much precedent here for how large this could be. If you look back to 2020, sanctions took about 1.9 million barrels of oil off the market. I think that’s what traders were thinking about — do we get to that type of scenario, and what are the ramifications if something happens over the weekend?
LORNE: When you look at the fundamentals of supply and demand, what do you see?
JEREMY: There are differing opinions among the major organizations, and what matters is how investors interpret those views. The EIA just released its forecast, showing demand growth of about 1.2 per cent through 2027, but also significant OPEC production coming on, which pushes inventories toward levels not seen since COVID. Meanwhile, OPEC’s own demand expectations for 2026 and 2027 are well above the EIA’s. That’s why OPEC argues it needs to keep producing to maintain balance. These differences explain why there’s so much unease about where oil could head in 2026 and 2027.
ROGER: Is there one forecast you lean toward?
JEREMY: Historically, the EIA tends to be middle of the road. OPEC is usually more optimistic, while the IEA is more bearish. Eventually, forecasts tend to converge partway through the year, but right now the gap between them is unusually wide. That’s driving investor concern about who is right and who will adjust. If demand is weaker, OPEC would likely cut, which could put a floor under prices. At these levels, new drilling is becoming marginally economic, so we could see non-OPEC production decline, which would support prices. The question is timing, especially with all the geopolitical uncertainty layered on top.
LORNE: How do valuations look, and what do you like in the sector?
JEREMY: Relative to the commodity price, valuations are higher than they’ve been before, but compared with other sectors, energy still looks reasonable. That’s why we’re seeing renewed interest. Many investors prefer natural gas exposure to avoid oil volatility. In this environment, we’ve been advising clients to stay conservative — focusing on royalty companies like Topaz and PrairieSky, as well as companies with strong balance sheets in top-tier plays. Headwater is one example. These names offer exposure to a recovery in oil prices without taking on excessive risk at current levels.
ROGER: Are we getting a clearer sense of how Venezuela and recent developments with China could affect Canadian oil flows?
JEREMY: Every day there’s a new headline that makes investors either bullish or nervous. There’s a lot of speculation around Venezuela, with many people trying to estimate how quickly production could increase. Realistically, maybe a few hundred thousand barrels could come on sooner, which has contributed to heavy oil differentials widening by a couple of dollars over the past week. The bigger issue is longer-term growth — from Canada and Venezuela — and how quickly that supply materializes. That uncertainty is what’s driving investor caution. I don’t think the outcome will be as dire as some fear, but this is more of a one- to two-year discussion, echoing comments from Exxon just last week.
ROGER: Jeremy, thanks very much for joining us.
JEREMY: Thank you.
ROGER: Jeremy McCrea, managing director of energy research at BMO Capital Markets.
—
This BNN Bloomberg summary and transcript of the Jan. 16, 2026 interview with Jeremy McCrea are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.