Oil prices nearing end of ‘lower-for-longer’ period
singapore — The age of persistently weak oil prices is nearing its end, with demand booming and a supply squeeze in the offing, according to Trafigura Group.
The global market could face a shortage by 2019, Ben Luckock, co-head of Group Market Risk at the third-largest independent oil trader, said at the S&P Global Platts APPEC conference on Tuesday. As much as 9 million barrels a day of supply could be lost to crude-well declines by 2019, and the company is bullish on demand, he said, especially in India, the world’s fastest growing oil consumer.
“We are nearing the end of ‘lower for longer’ oil,” Luckock said, referring to a term used as far back as April 2015 by BP Plc boss Bob Dudley as a global glut wreaked havoc on crude prices worldwide. The forecast was made as the who’s who of the oil industry gathered in Singapore for the annual Asia-Pacific Petroleum Conference, where participants turned bullish and executives pointed to strong demand and falling inventories. If proven right, it would brighten the outlook for big oil, which since 2015 has tightened its belt to weather the crisis, and help crude-rich countries, potentially affecting local equities, sovereign bonds and currencies.
Trafigura’s view that demand is set to outstrip supply mirrors Citigroup, whose global head of commodities research said that a market squeeze may emerge as early as 2018. Strong economic growth is boosting oil consumption well above historical levels, according to BP, while Opec and its allies curb output.
A surge in US shale production that spurred the Organisation of Petroleum Exporting Countries to pump at will to defend its market share exacerbated a market oversupply over the past three years, driving the biggest price crash in a generation.
Opec has this year changed tack by curbing output in a bid to shrink the glut. — Bloomberg