Daan Struyven, Goldman Sachs co-head of global commodities research, joins 'Squawk Box' to discuss the state of the global energy markets, oil price trends, impact of a weaker dollar, and more.

Daan Struyven, co-head of global commodities research at Goldman Sachs, reports that oil supply is set to increase at a rate four times faster than global demand this year. This robust supply growth comes from both OPEC-plus countries reversing post-pandemic cuts and new offshore projects in countries like Brazil, Guyana, Norway, and Kazakhstan. U.S. shale production has also reached record highs, further boosting supply.

Despite ongoing geopolitical tensions and a relatively resilient global economy, the oversupply is leading to inventory builds and downward pressure on oil prices. Struyven forecasts an additional $10 downside in crude oil prices over the next year. He notes that while global oil demand continues to grow, it does so at a modest pace compared to other commodities. The weaker U.S. dollar is providing some support for commodity demand, but the overall outlook for oil remains cautious.

Oil supply set to grow 4x more quickly than demand this year: Struyven

All right, let's take a look at WTI this morning. Crude oil up by about 1%, 65.77. It's dropped down from the roughly $75 level that we saw just a couple of weeks ago, when Israel and Iran were firing missiles at each other. Joining us right now is Don Strivin. He is Goldman Sachs co-head of Global Commodities Research. And it's the beginning of a new quarter, so let's look back at what happened last quarter, Don, and just kind of walk through things. WTI was up 7% for the month, but it's down 9% for the quarter. That's the fourth quarter out of the last five that we've seen a negative price decline, or a negative price, not a negative price decline, because a double negative cancels that out and makes it sound positive. You know what I mean. Let's talk through what's happening with commodities, because if you look at natural gas, it's down 16% for the quarter. Arbab gasoline down 9%. What's happening in the industry? Yes, I think we're seeing pretty strong supply growth, despite, of course, the fear about supply disruptions in the Middle East that markets went through over the last couple of weeks. But I think the bottom line is that oil supply this year is set to grow four times more quickly than global oil demand, with pretty strong supply growth, both from OPEC-plus countries, reversing their post-pandemic production cuts, and in countries such as Brazil, Guyana, Norway, Kazakhstan, that are bringing those offshore projects online. On top of that, while our base case is that U.S. shale supply edges down this year for crude, we actually just got the April reading yesterday for U.S. lower 48 crude, and we got an all-time high. So even U.S. shale supply is holding up. So the bottom line is supply growth is strong. That's leading to inventory builds, and it's leading to lower price. And we think this trend will continue. We see another $10 of downside over the next 12 months for crude oil prices. So we've got a lot of supply against a backdrop of what for a global economy. It feels like the global economy is okay at the moment. It's fairly resilient. So our cautious oil price forecast is a supply call. It's not a demand call. We have demand growing by around 600 KBD this year. That's not spectacular compared to history or compared to other commodities. It's, for instance, global power demand growing 45%, or China copper demand up 25% on a year-over-year basis. But it's not negative. It's still growing. And I guess that's, you've watched oil prices come into these levels with a decent global economy. What would happen if there was a downturn around the world? Yeah, so then we do see some downside risk to our already pretty low forecast of oil in the mid-50s in 2026, both because OPEC could raise production for longer than our base case, and because recession risk is still somewhat higher than elevated, around 30% or so over the next 12 months in the U.S. according to our economists. How does the dollar play into this? We were just talking earlier about how the dollar has seen the weakest first half since 1973. Yeah. It's down, I think, 11% maybe a year today. Yeah, and our effect strategists expect this dollar weakness to continue. Mechanically, a weaker dollar tends to be positive for demand of commodities that are denominated in dollars, especially commodities such as most metals, where the rest of the world outside of the U.S. accounts for the largest share of demand. And in fact, our global oil demand forecast would be 300, 400 KBD lower if it were not for the boost from the weaker dollar to demand. To figure out which commodity wins in a weaker dollar, lower U.S. rates environment, I think you want to think about whether it's risk on when the industrial metals such as copper do well, where the weakness in the dollar is perhaps explained by stimulus in China or stimulus in Europe, or perhaps just investors rebalancing their portfolios from very high dollar shares to lower dollar shares. If you have a weaker dollar because of U.S. recession fears or concerns about U.S. fiscal sustainability, then it's gold that tends to do well. And gold, by the way, for the quarter to date, up 5%. Don, it sounds like you have a lot of moving pieces. Am I right to think it sounds like more moving pieces than usual, or is this just always the case? A lot of cross-currents, a lot of divergence, yeah. Why? To summarize it, we see the most upside to gold and to U.S. copper prices, where we think tariffs are underpriced, and we see downside on the oil side. I think more broadly with China commodity demand becoming so divergent with very strong power demand growth, copper demand growth, but a peak in China oil demand, very weak LNG gas imports at the moment if you have this divergence across commodities in what has traditionally been the engine of global commodity demand growth. I think you're in an environment where commodity prices are a little bit more divergent.

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