World’s biggest traders see oil at $65-$100 a barrel next year

Traders expect oil storage tanks worldwide to start emptying amid reduced global supplies caused by sanctions against Iran as well as other factors. (Shutterstock)
Updated 11 October 2018
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World’s biggest traders see oil at $65-$100 a barrel next year

  • Oil has rallied this year on expectations that the sanctions, coming into force on Nov. 4, will test the ability of OPEC and others to fill the supply gap
  • Brent crude last week reached $86.74 a barrel, the highest since 2014

LONDON: The world’s biggest trading houses said on Wednesday they saw oil prices not falling below $65 per barrel and possibly breaking above $100 next year as US sanctions on Iran reduce crude exports from the Islamic republic.
Oil has rallied this year on expectations that the sanctions, coming into force on Nov. 4, will test the ability of OPEC and others to fill the supply gap as shipments from OPEC member Iran decline.
Brent crude last week reached $86.74 a barrel, the highest since 2014.
But in 2019, forecasters such as the International Energy Agency say emerging-market crises and trade disputes could dent global demand while rising non-OPEC production adds to supply.
Jeremy Weir, chief executive of Trafigura, said at the Oil & Money conference in London that he would not be surprised to see oil trade at more than $100 per barrel next year.

 

Alex Beard, chief executive for oil and gas at commodity trading company Glencore, said at the same event that he forecast a mid-term oil price of $85-90, as a release of US strategic oil stocks looked remote and would have limited impact anyway.
“I think the sanctions will be very tough. Waivers will be extremely limited, if any, and I don’t see an end to it as the objective is regime change in 2019. I can’t see anything that will affect oil prices dramatically to the downside,” Beard said.
“The European payment mechanism doesn’t shield you if you use the US financial system ... you can pay but don’t expect to be on their Christmas card list.”
Beard added that US infrastructure limitations would limit US crude exports that could otherwise compensate and new refining capacity coming online in 2019 would add further tightness.
The traders said, however, they expected some demand destruction in emerging market economies to help cap oil prices.
The chief executive of Gunvor, Torbjorn Tornqvist, said he saw lower prices next year at $70-$75, citing a slowdown in demand growth and a well-supplied market.
“There will be some Iranian exports but the amount will depend on the price. If oil goes up to $100 a barrel then waivers, if it stays around $80 a barrel then no waivers,” Tornqvist said.
Vitol and BP presented the most bearish views. Vitol Chairman Ian Taylor forecast a price of $65 a barrel.
“We’ve knocked down our demand growth forecast this year and for next year ... I think the only issue is: Will the US pipeline in the Permian (oilfield) manage to deliver a huge increase in the second half of 2019?,” Taylor said.

FASTFACTS

Industry forecasters such as the International Energy Agency say emerging-market crises and trade disputes could dent global demand while rising non-OPEC production adds to supply.


Saudi Aramco to invest in refinery-petrochemical project in east China

Updated 52 min 32 sec ago
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Saudi Aramco to invest in refinery-petrochemical project in east China

  • This is the third such project in China that Saudi Aramco has set its sight on
  • Last month, Saudi Aramco signed a long-term deal with the Zhejiang project’s operator Zhejiang Rongsheng to supply crude oil

ZHOUSHAN, China/SINGAPORE: State oil giant Saudi Aramco signed an agreement on Thursday to invest in a refinery-petrochemical project in eastern China, part of its strategy to expand in downstream operations globally.
The memorandum of understanding between the company and Zhejiang province included plans to invest in a new refinery and co-operate in crude oil supply, storage and trading, according to details released by the Zhoushan government after a signing ceremony in the city south of Shanghai.
Zhejiang Petrochemical, 51 percent owned by textile giant Zhejiang Rongsheng Holding Group, is building a 400,000-barrels-per-day refinery and associated petrochemical facilities that was expected to start operations by the end of this year.
This is the third such project in China that Saudi Aramco has set its sight on as it seeks to lock in long-term outlets for its crude oil and produce fuel and petrochemicals to meet rising demand in Asia and cushion the risk of a slowdown in oil consumption.
Last month, Saudi Aramco signed a long-term deal with the Zhejiang project’s operator Zhejiang Rongsheng to supply crude oil.
The oil giant had not yet finalized the size of its stake in the project and still needed to complete due diligence, Aramco’s Senior Vice President of Downstream, Abdulaziz Al-Judaimi, said on the sidelines of the event.
Saudi Aramco expects to supply 170,000 barrels per day of Saudi crude to the refinery in Zhoushan when it starts operations, he said.
The first crude carrier supplying the refinery should arrive in December or January, depending on when the project starts, he added.
Aramco also owns part of the Fujian refinery-petrochemical plant with Sinopec and Exxon Mobil Corp, and has plans to build a 300,000-bpd refinery with China’s Norinco. It is also in talks with PetroChina to invest in a refinery in Yunnan.