Global commodity traders Gunvor and Trafigura project that oil prices could fluctuate between $60 and $70 per barrel, attributing this outlook to weak demand from China and ongoing global oversupply, as stated by executives at a conference on Monday.
Oil prices have faced downward pressure due to concerns
regarding diminishing demand in major economies like China and the U.S.,
despite earlier predictions that summer demand would provide support. Prices
have declined after surpassing $90 a barrel earlier this year.
Market optimism was briefly restored when the Organization
of the Petroleum Exporting Countries and its allies, collectively known as
OPEC+, decided last week to postpone a planned increase in oil output for
October and November. However, traders caution that this relief may be
temporary.
Ben Luckock, global head of oil at Trafigura, remarked at
the Asia Pacific Petroleum Conference (APPEC) that while the market received a
minor boost, it is insufficient, predicting that oil prices could soon drop
into the $60 range. He emphasized the market's need for assurance that OPEC
will not rapidly increase production.
Torbjorn Tornqvist, co-founder and chairman of Gunvor,
stated that the fair value of oil is $70 per barrel, noting that global
production currently exceeds consumption, a situation expected to worsen in the
coming years.
He acknowledged OPEC's effective management but pointed out
that they do not control the significant growth occurring outside their
organization.
Oil futures surged by one dollar in early trading on Monday
as a potential hurricane system neared the U.S. Gulf Coast. By 0628 GMT, West
Texas Intermediate crude futures were up approximately 70 cents, reaching
$68.38 per barrel, while Brent crude futures stood at $71.75 per barrel.
OVERSUPPLY, SOFT CHINA DEMAND
The International Energy Agency (IEA) projects that oil
supply growth for this year will reach 770,000 barrels per day (bpd), bringing
total supply to an unprecedented 103 million bpd. This growth is anticipated to
more than double in the following year, reaching 1.8 million bpd, with the
United States, Canada, Guyana, and Brazil at the forefront of this increase.
Jim Burkhard, vice president of research at S&P Global
Commodity Insights, remarked at the APPEC conference that while growth in the
U.S. is slowing, it remains significant, posing additional challenges for OPEC+
in their decision-making processes.
Burkhard predicts that OPEC+ will raise oil supply next year
for the first time since 2022. Even if the group opts against this, the global
spare oil production capacity, which includes over 5 million bpd in the Middle
East, is likely to exert downward pressure on prices.
He noted that the cycle of oil supply surplus is ongoing and
will likely persist until 2026 or later. Additionally, soft demand from China,
the world's second-largest economy, is causing concern in the markets.
Trafigura's Luckock mentioned that some market participants
believe Beijing may have additional economic stimulus measures ready,
contingent on the results of the U.S. presidential elections in November.
Luckock pointed out that while the Chinese government is
implementing various strategies to support the economy, none have been the
large-scale initiatives that the market often anticipates.