Global crude oil supplies to improve on refinery maintenance: Vitol exec

Global crude oil supplies are expected to improve in the next six to eight weeks because of refinery maintenance, although sour crude will stay tight, said Russell Hardy, chief executive of the world’s largest independent oil trader, Vitol.

Speaking at the Appec conference in Singapore yesterday, Hardy said sour crude economics will remain stronger than sweet because of the Opec+ cuts.

“Because of the Opec+ cuts, there’s not sufficient supply (of sour crude) for all these complex refineries in India, Kuwait, Jizan, Oman and China,” he said.

“They all want to buy sour crude, but it is not really a Western supply, it is mainly from the Arab Gulf. There are too many customers and not enough material to go around.”

Hardy also said Brent oil prices have been “pretty stable” trading between US$72 and US$88 (RM335 and RM409) per barrel for nearly a year. Price volatility is coming from the products market rather than crude, he said.

“The volatility is coming from products because refining capacity is very, very tight. Lots of refineries closed during Covid and the West really doesn’t have the product making capacity it needs, now that Russian exports are making their way to Asia,” Hardy said.

Global crude price Brent rebounded in the past two months to more than US$80 a barrel after Opec+ – producer group the Organization of the Petroleum Exporting Countries and its allies – deepened supply cuts.

Analysts expect Saudi Arabia, the de facto leader of Opec, to extend additional output cut of 1 million barrels per day for a fourth month in October.

On Russia, Hardy said Western sanctions on the country are working as Russian oil is trading at lower price levels.

“Western sanctions on Russia are working ... in the sense that they’re creating less or lower revenues, lower invoice prices for Russian goods,” he said.

“The flip side of sanctions is that it is creating stronger bonds between BRICS countries ... So I think that’s a very negative aspect,” he said, referring to the BRICS group of major emerging economies, made up of Brazil, Russia, India, China and South Africa.

A price cap on Russian oil was introduced in December last year by G7 countries to limit revenues going to Russia after its invasion of Ukraine.

A senior executive from global energy trader Gunvor Group told the conference that European Union shipping services are still handling about half of Russia’s crude oil output.

It is 50% at the moment, which is still quite high, said Frederic Lasserre, Gunvor’s global head of research and analysis.

“If we don’t see an increase (from the 50%), it means that there (are) no domestic refinery issues in Russia,” he said.

Lasserre also told the conference he sees an increase in Iranian crude supply and exports, which will be good for the global market balance. – Reuters