Via Financial Times

The world’s largest energy traders are betting oil will slip further next year, heaping pressure on Opec and its allies to do more to prop up the price.

The heads of Vitol, Trafigura and Gunvor said at a conference on Wednesday that they expect oil to be trading below $60 a barrel in 12 months’ time, arguing that supply is still expanding while demand growth appears to be slowing in line with a weakening world economy.

Combined, the trio of companies handles approximately 15 per cent of global oil supplies daily, or 14m barrels a day.

Vitol chief executive Russell Hardy, who has run the world’s largest independent energy trader since last year, said tensions between the US and China would make it difficult for prices to rise.

“Without a resolution to the trade war we remain a little bit bearish,” Mr Hardy told the Oil & Money conference in London, predicting oil would trade in the $50s a year from now.

Trafigura chief Jeremy Weir said it was difficult to see a recovery before the fourth quarter of next year, predicting prices would be “lower than where they are now” in 12 months time.

Brent crude was trading near $59 a barrel on Wednesday, down about 16 per cent from its recent peak above $70 a barrel in the aftermath of the attacks on Saudi Arabia’s oil infrastructure.

The most recent drop in prices has raised speculation that Opec and Russia will need to make further production cuts to stabilise the price.

Helima Croft of RBC Capital Markets told the same conference that Saudi Arabia — Opec’s de facto leader — faced a difficult choice should the world economy be heading for a slowdown. The kingdom has already cut output by more than demanded by an agreement between Opec and Russia, but prices remain about $20 a barrel below the level Riyadh needs to balance its budget.

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“Saudi Arabia’s challenge with a softening demand outlook, is how much of the burden it should take itself,” Ms Croft said.

Torbjörn Törnqvist, chief executive and majority shareholder of Gunvor, said traders were looking to test Opec by pushing prices lower.

He told the Financial Times that market conditions had been good for traders so far this year, however. His own company enjoyed one of the strongest nine-month periods in its history, posting gross profits of $800m.

Mr Törnqvist said the money would be ploughed back into the business and would allow it to cancel the planned sale of its Ingolstadt refinery in Germany, which he said had earned strong profits this year.

“Our performance is in large part about refining,” Mr Törnqvist said, adding that changes to rules on shipping fuel in 2020 were likely to present more opportunities. But he cautioned the wider market may need Opec to take action.

“I suspect Opec will need to rein the market in,” he said. “Supply is rising and the market is signalling there is more than enough oil.”

Additional reporting by Harry Dempsey