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A potential OPEC deal to limit crude production will not result in a substantial cut to global oil supplies, the top executives of the world’s largest oil trading companies have said, speaking at the Reuters Commodities Summit.
Last month, OPEC producers agreed to discuss a deal to limit production to a range of between 32.5 million barrels per day and 33 million bpd. Data by the International Energy Agency (IEA) showed on Tuesday that crude oil output in OPEC reached a new record of 33.64 million barrels per day in September.
Even if OPEC were to firmly decide to apply oil production cuts on November 30, the organization can’t adjust cargo loading schedules until January of next year, and until then, the market will have a lot more oil, according to Gunvor’s CEO Torbjorn Tornqvist.
Libya and Nigeria are increasing production from the lows they have seen this year due to violence and unrest affecting oil infrastructure, and they “can wipe out any other deal that has been agreed,” Tornqvist said.
Further, Iraq has announced plans to increase its crude production, and is spatting with OPEC on just whose production numbers would be used to calculate any freeze or cut.
“I don’t have high expectations of sustained higher oil prices, certainly for the medium term,” the Gunvor manager noted.
OPEC still has “work to do come up with the detail that will convince the market,” Alex Beard, head of oil at Glencore, said.
Related: OPEC Chief Says Cartel Lost US$1 Trillion To Oil Price Bust
The top managers of the oil trading firms concur that the oil market will not rebalance until at least mid-2017 or even after that, in the second half of next year. They do not expect oil prices to rally much either, even if some believe that the market may have found some sort of bottom at US$45-50.
While oil traders are concerned with the market oversupply this year and next, Big Oil is worried about supply in the long run. The sharp decline in capex following the 2014 oil price crash may lead to shortage of supplies, some of the industry’s top executives have said at the World Energy Congress in Istanbul.
“By 2020 we will have a lack of supplies,” Total SA (NYSE:TOT) chief executive Patrick Pouyanne said at the congress, as quoted by Reuters.
While BP (NYSE:BP) chief executive Bob Dudley noted: “As much as a $1 trillion of big projects have been cancelled or deferred around the world and that could catch up with the world.”
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.