Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

Vitol CEO sees oil above $100 for a ‘prolonged period’ this year

© Bloomberg CreativeCrude oil on oilfield pipework in Russia. Photographer: Bloomberg Creative Photos/Bloomberg Creative Collection
Crude oil on oilfield pipework in Russia. Photographer: Bloomberg Creative Photos/Bloomberg Creative Collection

Oil prices could be set for a “prolonged period” above $100 a barrel over the next six to nine months, with the world setting fresh demand records this year, said Vitol Group chief executive Russell Hardy.

Crude already surged to within a few dollars of that level earlier this month, as the recovery in fuel use from the pandemic started to run into supply constraints. In an interview in London with Bloomberg television, the boss of the world’s largest independent oil trader said the market will get tighter, with daily consumption set to rise well above pre-Covid levels by the end of 2022.

“The 100 million-barrel number is probably going to be exceeded this year,” Hardy said. “Demand is going to surge in the second half” if travel continues to return to normal.

As some of the biggest players in oil markets gather in London for International Energy Week — the first time the event has happened in-person for two years — their industry is still grappling with the consequences of the initial pandemic price slump.

Energy supplies are struggling to keep up with a robust economic recovery. Several OPEC+ members, plagued by under-investment and disruptions, aren’t able to revive all of the output they shut down in 2020. Many companies, from US shale drillers to global supermajors, are focused on giving cash to shareholders instead of growing production.

The result is a surge in oil prices that’s feeding an inflationary spike. The situation threatens to derail the global economic recovery and inflict a cost-of-living crisis on millions.

“More crude is required,” Hardy said. With daily demand rising by the end of this year to 1 million or 2 million barrels a day above end-2019 levels, “the whole system is going to be fairly tight.”

The tightness of the market is demonstrated by a price structure in oil futures called backwardation — where prices for near-term delivery rise above contracts for later months. This pattern is currently prevalent in crude, diesel, natural gas and coal.

“The situation we have today, where all markets are very backward, tells you there’s not much give in the system,” Hardy said. Energy supplies are only arriving “just in time at the moment, which is not a great place to be.”

Patchy Recovery

The recovery in fuel demand is still uneven. In oil products, Vitol sees gasoline consumption in the US down by around 400,000 barrels a day currently, compared with February 2019.

“We still think it’s being affected by work from home,” Hardy said. “People are not driving to the station, they’re not driving to work.” High prices may also be encouraging drivers to use their cars less, he said.

Instead, diesel-powered industrial transportation is fuelling demand growth, but jet fuel consumption remains capped by a lack of long-haul flights.

Oil supply is growing, just not as fast as consumers need, Hardy said.

US shale is increasing, but not at the same level it did during the boom years. Capital constraints from drillers and a lack of crew are also holding back production, Hardy said.

OPEC+ is gradually boosting output, and a nuclear deal with the US could allow Iran to pump an extra 1 million barrels a day, but that supply is already factored in for the second half of the year, Hardy said.

“Eventually we’re going to run out of spare capacity,” he said. “That’s what the market is trying to work out — how worried to be about that scenario.”

Recommended for you

More from Energy Voice

Latest Posts