The heads of the world’s top oil trading houses are unanimous that Iranian sanctions will remove a large chunk of oil from the market, more than initially expected, but they have very diverging opinions on where oil prices are headed for the rest of the year and in 2019.
At the Oil & Money conference in London this week, the top executives of Vitol, Trafigura, Gunvor, and Glencore predicted the price of oil next year at between $65 and $100 a barrel due to a combination of many other factors apart from the U.S. sanctions on Iran—highlighting the uncertainty in the oil market about where prices are heading.
Vitol Group chairman Ian Taylor is the most bearish among the top oil traders, seeing Brent Crudeat $65 a barrel next year, while Trafigura’s chief executive Jeremy Weir is the most bullish and says he wouldn’t be surprised to see oil hitting $100 per barrel by the end of next year.
Speaking to Bloomberg on the sidelines of the London conference, Vitol’s Taylor said that “Physically, we don’t have a supply squeeze. There’s plenty of oil around.”
The Saudis are right when they say that they’ve got enough oil to supply everybody who wants it, so what we have in the market is a little bit more of a “fear factor,” Taylor said.
“To my mind, we don’t really have a supply squeeze at all,” Taylor told Bloomberg.
Asked about where Brent Crude prices will be on January 1, 2019, Taylor said he wouldn’t be surprised to see it $5-10 below current levels, because the season when the market won’t need so much crude oil is coming.
Iranian crude oil exports will be much reduced, and if they stay above 1 million bpd, “we’ll be much surprised,” Taylor said.
Vitol’s chairman expects that the United States could issue a few waivers, but not many.
OPEC are beginning to try to produce whatever they can, Taylor said, adding that this view is part of his prediction that oil prices are heading down.
The other big factor in Vitol chairman’s bearish forecast is that “no doubt about it—we’re going to see demand destruction, sadly.” Emerging markets are really struggling with higher oil prices coupled with currency depreciation, so there will be slightly less demand going forward, according to Taylor.
Vitol has just reduced its oil demand growth forecast for this year from about 1.6 million bpd to about 1.35 million bpd, he said.
“I’m pretty bullish. In the short term we’ve already got the stars aligned here. Consumption is still increasing . . . Iran is there, so it’s looking quite positive into year end before even talking about the speculative influence which tends to make things overshoot,” the Financial Times quoted Weir as telling the London conference.
“I wouldn’t be surprised to see three figures on oil,” Weir said.
Alex Beard, chief executive Oil & Gas at Glencore, is also in the bullish corner with Weir and expects prices to be well supported.
“Sanctions will be extremely tough. I don’t see many wavers … I think the real reason is regime change,” Beard told the London conference.
Beard doesn’t see “any chance” that the European Union’s payment mechanism to keep trade with Iran could work.
“I can’t see anything that will affect oil prices dramatically to the downside,” Beard said, as quoted by Reuters, expecting oil prices at $85-$90 in the medium term.
Gunvor’s chief executive Torbjörn Törnqvist is in Vitol’s bearish corner, seeing lower Brent prices next year—$70-75—although not as low as Taylor’s $65 forecast. Slowing oil demand growth, a well-supplied market, and overstated fears that Saudi Arabia can’t make up for the Iranian shortfall are Törnqvist’s reasons to expect oil prices to drop from current levels.
Sanctions on Iran will be a big disruption in the oil market, leading oil traders concur, but their oil price predictions vary so widely that they are only highlighting the current mood in the market—uncertainty