The world’s leading commodity traders have expected a return to $ 100 a barrel of oil, as investments in new supplies slow before demand is peaked and before green alternatives can pick up. slack.
Executives at Vitol, Glencore and Trafigura and Goldman Sachs said Tuesday that $ 100 crude was a real possibility, with prices already reaching their highest level in two years this week as Brent crude moved above $ 73 a barrel.
The forecast comes at a time where concern for inflation is rising and many raw materials, such as copper, have already hit record highs, spurred by supply shortages as the economic recovery grows.
Oil is lagging behind due to a slowdown in demand during the coronavirus pandemic and fears of demand may increase in the next decade. But forecasts that prices will go much higher in the coming years have picked up momentum in recent weeks.
Jeremy Weir, executive chairman of Trafigura, one of the world’s largest independent oil traders, told the FT Commodities Global Summit Tuesday that he was “concerned” by the lack of spending on the new supply because the world was not ready to make the leap to clean energy and complete electrification.
“I really think there is a possibility for the oil to go up to these numbers,” he told the summit. “The problem for oil is not demand… The supply situation is quite concerning. We have gone from 15 years of reserves to 10 years. We have seen capital expenditure go from five years ago to 400 billion. of dollars a year to only $ 100 billion a year. So there is a concern on the supply side … which I think will probably increase prices. ”
Alex Sanna, the top oil trader at Glencore, also said the $ 100 oil seemed more likely.
“If you’re cutting supply without meeting at the same time your demand is when you can get price dislocations,” Sanna said. “It’s really just one or two events away from a material rise in oil prices.”
Oil has not traded above $ 100 a barrel since 2014, when a source of supply from the U.S. shale sector led to last so called supercycle in the end. At the beginning of this century, oil prices rose by close to $ 10 a barrel to reach over $ 100 in 2008, stimulated by rising Chinese demand. Prices, while volatile, have averaged about $ 100 a barrel for the next six years.
Russell Hardy, chief executive of Vitol, the world’s largest independent oil trader, said the $ 100 oil was a “possibility,” although he believes there should be enough reserve capacity, with Opec and allies like Russia are still restricting supply because of the pandemic.
“There are 5m barrels of reserve production that are being held off the market today,” Hardy said.
But Jeff Currie at Goldman Sachs, one of the big proponents of the oil rally of the past decade, has argued that raw materials hold a new supercycle as government stimulus measures increase demand.
He believes oil demand will increase because policymakers will use the spending on huge green infrastructure projects as stimulus measures aimed at tackling inequality.
“We argue that every $ 2 trillion worth of green capex oil is worth about 200,000 barrels per day of oil demand,” he said.
Hardy told Vitol that the trading house believed that demand for oil would grow around 2030, but that at first demand it would not fall sharply initially, instead dropping well above the 100m barrels at the level of the day before. reached for the first time in 2019.
The key period for the risk of an oil supply gap was between 2025 and 2030, he said, and that because of the growth in the developing world it would take until 2040 for global oil demand to begin. to fall rapidly.
“Demand for oil is likely to continue to grow until 2030, obviously dominated by non-OECD markets and developing countries,” he said.
Marco Dunand, co-founder of Mercury, said he expected oil demand to pick up to pre-pandemic levels and reach just over 100m b / j by the end of the year, while Torbjörn Törnqvist, president of Gunvor, agreed that $ 100 oil could return and that high prices were needed to encourage investment in the industry.
Some of the largest oil producers such as BP and Royal Dutch Shell have said that their oil production will start to decline in the coming years as they shift investments towards greener forms of energy under the pressure of investors.
Equinor, the state-backed Norwegian oil company, said on Tuesday it would put 50% of its capital spending on renewable and low-carbon investments by 2030, but did not expect to see its oil production drop until that date.