Top executives from the world’s largest commodity trading houses and major energy firms are joining analysts at the biggest Asian industry event this week, days after crude oil prices hit their highest level this year.
The Asia Pacific Petroleum Conference (APPEC) by S&P Global Commodity Insights will see from Monday to Wednesday the participation of many top executives in the petroleum industry, including Russell Hardy, CEO at the world’s largest independent trader Vitol, Ben Luckock, Co-Head of Oil Trading at another major trading house, Trafigura, Frederic Lasserre, Global Head of Research & Analysis at Gunvor Group, and executives from oil majors such as Equinor, Shell, and BP.
The APPEC annual event in Singapore is expected to offer insights into the current state of the physical oil market and expectations about supply, demand, oil prices, and refining margins in the near to medium term.
Many analysts have said that the market has already started to see the physical tightness that Saudi Arabia is aiming for.
Saudi Arabia is estimated to have reduced its crude oil exports in August to the lowest in two and a half years as the Kingdom continued to slash production by 1 million barrels per day (bpd) to keep markets tight and push oil prices higher.
Shipments out of the world’s top crude exporter fell in August to the lowest levels since March 2021—to around 5.6 million bpd, with exports to China and the U.S. slumping to multiyear lows, preliminary data compiled by Bloomberg showed on Friday.
There are expectations that Saudi Arabia will announce a further extension of the cuts into October. Russia’s Deputy Prime Minister Alexander Novak said last week that Moscow would disclose this week the parameters of the OPEC+ deal.
“OPEC+ cuts, and in particular additional voluntary cuts from Saudi Arabia, mean that the market is drawing down inventories,” Warren Patterson, Head of Commodities Strategy at ING, said at the end of last week.
“We expect this trend will continue until the end of the year, which suggests that oil prices still have room to move higher from current levels.”
The market tightening is largely due to the OPEC+ supply cuts, ING’s Patterson and Ewa Manthey wrote in a note dated September 4.
“We believe that the Saudis will likely roll over the cut into October, as they will not want to put any renewed downward pressure on the oil market, although fundamentally, the market should be able to absorb the return of these barrels, given the large deficit forecast for the rest of the year,” they said.
The large deficits expected on the oil market are drawing down inventories, which could limit downside risks to oil prices and add $2 a barrel to Goldman Sachs’s end-year call for $86 per barrel Brent, the bank said at the end of last month.
“The main reason for oil outperformance is that the oil market continues to price sizeable deficits,” Goldman Sachs’s analysts wrote.
Barclays, for its part, last week hiked its Brent price forecast for next year by $8 to $97 a barrel, citing slower U.S. shale growth and persistent underproduction from several OPEC+ producers, which are set to tighten the oil market further in 2024.
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On Friday, oil prices hit their highest level so far this year, with WTI Crude settling at above $85 per barrel and Brent Crude at over $88 a barrel. A surprise uptick in China’s factory activity and a cooling U.S. job market pushed oil prices higher amid rekindled hopes of a turnaround in China’s economic performance and increased expectations that, with a cooled labor market in the United States, the Fed could hold interest rates unchanged at its late-September meeting.
This week, the market will be closely watching a possible rollover of the Saudi and Russian supply cuts and the oil price views of the world’s largest commodity traders from the APPEC conference in Singapore.
By Tsvetana Paraskova for Oilprice.com
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1- China-led Asia-Pacific region will continue to be the driver of the global economy and oil and energy demand well into the future.
2- Crude oil prices are now on an upward trajectory which will continue well into the future. This trend will, on the whole, be irreversible.
3- The BRICS group is destined to be the dominant force in the global economy accounting by 2030 for at least 52% of the global GDP at the expense of the United States’ and the EU’s. BRICS’ growth will be enhanced by many new members joining the group.
4- By 2030 the yuan will be the principal reserve currency in the world with the petro-yuan being the main oil currency along with a proliferation of few other currencies.
5- The fundamentals of the global oil market and not OPEC+ are the ones which will determine the direction of oil prices. And while OPEC+ can always play a supporting role by adjusting its oil production policies, it can never be able to set the price it wants.
6-Russia’s oil and energy exports will continue to be the cornerstone of the global energy markets well into the future.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert