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EIA Sharply Cuts Oil Price Forecast

The EIA has once again…

Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Largest Oil Traders: Oil Prices Aren’t Going Anywhere

Oil prices are not going anywhere, at least until this time next year.

Brent Crude will still trade range-bound in the $50s a year from now, the heads of the world’s largest independent oil and commodity trading groups said on Wednesday.

The still unresolved U.S.-China trade dispute, mounting evidence that global economies are slowing, and rising U.S. oil production will continue to keep a lid on oil prices in a market that has factored in too little—or none at all—geopolitical risk premium, the chief executives of oil traders Vitol, Trafigura, and Gunvor said at the Oil & Money Conference in London this week.  

Vitol is bearish on oil prices, Trafigura is also bearish in the short term, while Gunvor thinks prices could inch higher but with swings in between, the managers said at the panel ‘Executive Forum: The View from the Trading Floor’ at the conference.

“Without some resolutions to the trade wars then we remain a little bit bearish, a five handle for us,” Russell Hardy, chief executive officer at Vitol, the world’s largest independent oil trader, said at the event, predicting where oil prices will be a year from now, as carried by S&P Global Platts.

A $50s handle for oil prices is the price at which oil currently trades, with Brent Crude at around $58 early on Thursday.

Like many other analysts, the executives of the top oil traders in the world see trade disputes and faltering economies as the chief oil market driver these days, despite the increased geopolitical risk following the unprecedented attack on critical Saudi oil infrastructure that took 5 percent of global oil supply offline in the middle of September. Related: Inventory Build Sends Oil Prices Lower

Vitol has been revising down its global oil demand growth estimates and now sees growth at just 600,000 bpd-650,000 bpd this year, Hardy said in early August.

In early September, Hardy said that Vitol expects oil prices to weaken in the fourth quarter this year, although prices are unlikely to be below $50 a barrel for a sustained period of time.

A month later, Hardy continues to believe that concerns about growth in economies and oil demand are driving the bearish market sentiment.

“The risk premium vanished pretty quickly after the Saudi attacks. Concerns over the future are winning,” Hardy told the Oil & Money Conference.

Jeremy Weir, executive chairman and CEO at Trafigura, also sees oil prices in the $50s in 12 months, maybe slightly lower than they are now.

According to Torbjörn Törnqvist, chief executive at Gunvor Group, oil prices will likely trade below $60 a year from now.

Gunvor’s chief executive also believes that OPEC may need to take further action to rebalance the market.

“I suspect Opec will need to rein the market in,” Törnqvist told the Financial Times. “Supply is rising and the market is signalling there is more than enough oil,” he added. 

Just as Vitol’s Hardy, Törnqvist also believes that “there seems to be very little risk premium from the geopolitical issues associated with the Saudi strikes.” Related: Is This The Next $170 Billion Energy Industry In The US?

On the sidelines of the same event, Shell’s chief executive Ben van Beurden said it was “a bit puzzling” over how well the market took the attacks in Saudi Arabia in stride.

“The market is a little bit anesthetized by trade wars and the glut of shale to the point where it has become blasé about geopolitical risk. I think it’s not representative of the real picture,” van Beurden told Bloomberg TV’s Annmarie Hordern on the sidelines of the Oil & Money Conference.

Not all analysts, however, are as bearish on oil prices as are the world’s top oil traders. S&P Global Platts Analytics sees Brent Crude ending this year trading at $65 to $70 a barrel, expecting crude oil stock draws in November and December to turn around the current bearish sentiment.

The market is currently driven by sentiment “rather than the real strong fundamentals of it,” Shell’s van Beurden told Bloomberg.  

“It’s very hard to make sense out of the market even on the best of days.”  

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Jessie Phillips on October 10 2019 said:
    Oil shouldnt be this high, but gas companies are keeping gas prices artificially high
  • Mamdouh Salameh on October 11 2019 said:
    Oil prices are definitely going somewhere this year and they will take everyone by surprise.

    Contrary to claims otherwise, the fundamentals of the global oil market are still positive. It is obvious that the most bearish impact on oil prices is the current glut and the cause is the trade war between the United States and China. The war has augmented a glut that ranged from 1.0-1.5 million barrels a day (mbd) before the war to an estimated 4.0-5.0 mbd. So if you remove the cause, everything else falls into place.

    President Trump knows he lost the trade war with China. He has no alternative but to end it soon if he wants to improve his chances of winning four more years in the White House. He can’t go to the American electorate with a declining US economy and a trade war trailing behind him.

    As for OPEC+, any deeper production cuts will be futile since they will have no effect on oil prices. Moreover, they will cost OPEC+ a loss of market share. By cutting their production OPEC+ will be dealing with the symptoms rather than the disease.

    An end of the trade war will lead to a deep reduction of the glut and this will enhance global demand for oil and therefore prices. As a result oil prices could surge to $70-$75 a barrel.

    Shell’s chief executive Ben van Beurden should not have been puzzled over how well the market took the attacks in Saudi Arabia in stride. The answer is simple. A glut estimated at 4.0-5.0 mbd was more or less able to offset a 5.7 mbd loss in Saudi oil production hence the reaction of the market and prices.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Steven Soychak on October 11 2019 said:
    Oil traders are about to take it in their shorts! Not enough geopolitical risk after Saudi missiles hit tanker today.

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