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Leading commodity operators in the world have forecast a return to oil of $ 100 a barrel as investment in new supplies slows before demand has peaked and before green alternatives can resume.
Executives from Vitol, Glencore and Trafigura and Goldman Sachs said Tuesday that $ 100 crude was a real possibility, and that prices were already hitting their two-year high this week as Brent crude moved above $ 73 a barrel.
The prediction comes at a time when it worries inflation rises and many commodities, such as copper, have already reached record highs, driven by supply shortages as the economic recovery picks up pace.
Oil has lagged behind due to the slowdown in demand during the coronavirus pandemic and fears that demand could peak in the next decade. But predictions that prices will rise much more in the coming years have gained strength in recent weeks.
Jeremy Weir, chief executive of Trafigura, one of the world’s largest independent oil traders, told the FT Commodities World Summit on Tuesday that he was “concerned” about the lack of new supply spending because the world was unprepared for make the leap to clean energy and full electrification.
“In fact, I think there is a possibility that oil will reach those figures,” he said at the summit. “The issue of oil is not demand. . . the supply situation is quite worrying. We have gone from 15 years of bookings to 10 years. We’ve seen capital investment go from five years ago to $ 400 billion to $ 100 billion a year. Therefore, there is a concern regarding supply. . . that I think will probably drive up prices. “
Alex Sanna, Glencore’s top oil trader, also said the $ 100 oil seemed more likely.
“If you reduce supply without meeting your demand at the same time, that’s when you’ll be able to get price dislocations,” Sanna said. “You’re just one or two events away from the material rise in the price of oil.”
Oil has not been trading above $ 100 a barrel since 2014, when supply from the U.S. slate sector increased last called supercycle until the end. Earlier this century, oil prices rose from about $ 10 a barrel to over $ 100 in 2008, driven by growing Chinese demand. Prices, while volatile, averaged about $ 100 a barrel over the next six years.
Russell Hardy, CEO of Vitol, the world’s largest independent oil trader, said $ 100 worth of oil was a “possibility,” though he believes there should be enough reserve capacity, with Opec and allies like Russia still restricting supplies due to the pandemic.
“Today there are 5 million barrels of spare production held in the market,” Hardy said.
But Jeff Currie of Goldman Sachs, one of the big proponents of the oil concentration of the past decade, has argued that commodities are looking at a new supercycle as government stimulus measures increase demand.
He believes oil demand will increase because policymakers will use spending on huge green infrastructure projects as stimulus measures aimed at combating inequality.
“We argue that every $ 2 trillion in green spending on capex is worth about 200,000 barrels a day of oil demand,” he said.
Hardy told Vitol that the trading house believed that demand for oil would peak in 2030, but that at first demand would not fall sharply, instead of exceeding the 100 million barrels per day it first reached. in 2019.
The key period for the risk of an oil supply gap was between 2025 and 2030, he said, and that, due to the growth of the developing world, it would take until 2040 for global oil demand to begin fall quickly.
“Demand for oil is likely to continue to grow until 2030, obviously dominated by non-OECD and developing markets,” he said.
Some of the largest oil producers, such as BP and Royal Dutch Shell, have said their oil production will begin to decline in the coming years as they shift investments to greener forms of energy under pressure from investors. .
Equinor, Norway’s state-backed oil company, said on Tuesday it would allocate 50% of its capital investment to renewable and low-carbon investments by 2030, but did not expect its oil production to decline until after this date.
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