Oil prices are unlikely to soar much above the $60 per barrel mark, considering that this price level would incentivize a lot of oil supply, including from the United States, Torbjörn Törnqvist, chief executive at one of the world’s largest independent oil traders, Gunvor, told Bloomberg on Friday.
“Once you hit $60 a barrel, any oil production out there is profitable, and the incentive for oil producers to hold back erodes real fast,” Törnqvist told Bloomberg in an email.
Brent Crude prices were cents away from reaching $60 early on Friday, after a strong rally this week, driven by the ongoing production cuts from OPEC+, the extra million-barrel-per-day reduction in Saudi Arabia’s output, strong Asian demand, and risk appetite on the markets.
Yet, according to Gunvor’s chief executive, these gains will be capped, especially in the first half of this year.
“The high-$50s are the higher end of our expectation for the first half, and we’re not sure we will see much higher,” Törnqvist told Bloomberg.
Global demand for oil products right now is still lagging behind the levels from just before the pandemic and is up to 5 million barrels per day lower than at the start of 2020, the executive said.
China is a strong driver of demand, while Europe is the worst-hit market. The U.S. is more stable than Europe with just “a couple million barrels loss in demand,” according to Törnqvist.
At the start of this week, Goldman Sachs issued another bullish message for oil markets, saying in a note that it expected global oil demand to recover to pre-pandemic levels of 100 million bpd by August this year. According to Goldman, the oil market was in a deficit of 2.3 million bpd in the final quarter of 2020. With supply still tight at the start of 2021, the immediate future for prices is bright despite expectations for a slow demand recovery.
By Tsvetana Paraskova for Oilprice.com
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