LONDON – The world’s largest oil traders are overwhelmingly bearish on the outlook for the crude price, which they believe will flounder below $60 a barrel, possibly as long as into 2017.
Record-high production from some of the major exporting countries, along with faltering demand in key importing nations such as China and Brazil, has cut the price of oil in half over the last year.
The oversupply that has built up in the market is one of largest in at least 30 years and even refineries around the world running at record rates in 2015 has not been enough to erase it.
Mercuria chief executive Marco Dunand said on Wednesday he saw the oil market returning to balance and even displaying a deficit in 2016, as non-OPEC producers limit supply to ward off more aggressive price declines.
But he only expected a modest pick-up in the price from its current level around $49 a barrel.
“Most people will agree that by end of next year, we’re going to start drawing (on stocks) and we will still do that in 2017, which over time will trigger a price rally, and I think there’s a chance that by the end of next year we might be more likely to be in a $55-type range, to $60 by 2017,” he told the Reuters Commodities summit.
Ian Taylor, the chief executive of the world’s largest oil trader Vitol, told the summit earlier this week his company forecast global oil demand growth in 2016 to reach around 1.35 million barrels per day (bpd), slowing from this year’s strong expected growth of 1.7 million bpd.
Taylor said he expected consumption in China to increase next year, but global demand growth would likely still fall short of the levels seen this year.
“Will we get 1.7 million barrels a day in 2016? No. I don’t think so and that’s one of my worries. If we did get 1.7 million bpd in 2016, then we could easily get to $60, but I don’t think we will,” Taylor said.
“Can I see a big run next year? No. If we are above $60 by the end of 2016 I will be a little bit surprised.”
THE BIG FOUR’S BILLION
The commodity trading world’s “Big Four” — Mercuria and Vitol, together with Gunvor and Trafigura — traded close to a billion tonnes of raw materials between them last year.
Low borrowing costs and booming demand from both consumer nations and financial investors in the last decade drove raw materials to record highs.
But the boom has turned to gloom, leaving surpluses in most commodities aside from oil.
Copper and aluminum have fallen this year to their lowest levels since the unfolding of the global financial crisis in 2009, while iron ore is set for its third successive yearly drop, driven in large part by slowing economic growth in China, the world’s biggest commodity importer.
Torbjorn Tornqvist, chief executive of trading house Gunvor, said he did not expect the oil price to rise beyond normal volatility levels at least until the middle of next year.
“There is no shortage of anything … There is a surplus everywhere,” he said adding that it will take many years to fix the current situation of oversupply.
Rival Trafigura, which does not issue price forecasts, also struck a distinctly negative note.
“As a trend over the last few years Trafigura has been pretty bearish on the oil prospects … now it’s up to production to adapt to the slower demand,” company chief executive Christophe Salmon said.
“We have been surprised over the last year or so by the responsiveness in some production to adapt to a lower oil price, there have been tremendous efforts notably the shale oil producers,” he said.
(Reporting by Amanda Cooper, editing by David Evans; Editing by David Evans)
This article was from Reuters and was legally licensed through the NewsCred publisher network.