Major traders split on oil but see lower gas prices next year

Three of the world’s biggest oil traders were at odds about where the oil price would be this time next year, with Vitol taking a bearish view while Gunvor and Trafigura stayed bullish.

Benchmark Brent crude surged above to $81 a barrel on Monday, hitting a three-year high and up more than 50% so far in 2021.

Vitol Chief Executive Russell Hardy told the Energy Intelligence Forum he expected the price to ease to about $75 a barrel by this time next year, citing inflation concerns.

Gunvor CEO Torbjorn Tornqvist told the conference: “I believe we’ll have Iran as a supply sometime in the next year so I would have to say oil will be around $85.”

Trafigura gave the highest forecast of $90 a barrel.

The traders still see a profitable period for upstream oil and gas investments over the next 10 years before oil demand starts to taper off.

Vitol expects demand for plastics to grow “well into the 2030s” and demand for jet fuel to grow into the 2040s.

Natural gas prices, particularly in Europe, have spiked since the start of the year due to a combination of low inventories, low supplies and higher Asian demand.

Renewable energy sources such as wind and hydropower had been unable to pick up the slack in Europe, Gunvor’s Tornqvist said.

“The gas market has become unaffordable domestically and for some industries,” Vitol’s Hardy said, although he predicted the liquefied natural gas (LNG) price would fall to about $15 per million British thermal units (mmBtu) next year from about $35 mmBtu now.

European benchmark natural gas prices at the Dutch TTF hub are at all-time highs, up nearly 400% since January. Some contracts are near 100 euros ($116) per megawatt hour (MWh).

Trafigura CEO Jeremy Weir saw the TTF at about 35 euro/MWh next year.

Gunvor’s Tornqvist expected the TTF price to fall to 60 euro/MWh but forecast a supply shortfall leading to “significantly higher prices” in about two years.
Source: Reuters (Reporting by Julia Payne and Ron Bousso; Additional reporting by Marwa Rashad; Editing by David Goodman and Edmund Blair)