The head of Vitol Group, the world’s biggest independent oil trader, expects crude demand to come roaring back this year and next as the world emerges from the pandemic. The company also says oil will surge to as high as $75 a barrel in the third quarter of this year.
The forecast is boon for Nigeria which is struggling under a severe fiscal crisis but the benefits of the surge in demand can come only if Nigeria were to forge a better relationship with the mainly western oil firms operating in the country.
Demand for crude will increase by 7 million to 8 million barrels a day by the end of 2022, up from current levels, and producers will be stretched to meet that surge, Vitol Chief Executive Officer Russell Hardy said in an interview with Bloomberg.
“We will need all eight cylinders to get through 2022,” Hardy said. “We believe $70 to $75 a barrel is an entirely sensible outcome for the third quarter,” he said, making a rare specific call on oil prices.
Nigeria is currently in the middle of negotiating fresh fiscal terms as part of a new oil industry law which the major oil firms have said does not go far enough to stall the massive divestment from the oil sector in Nigeria.
It’s a bullish call for a solid recovery in global petroleum use after the pandemic caused demand for jet fuel, diesel and gasoline to collapse.
Vitol handled more than 7 million barrels of crude and products a day in 2020, giving it keen insight into fluctuations in global supplies and demand.
Global oil demand remains about 3.5 million barrels a day below pre-pandemic levels, Hardy said.
Consumption should rebound by year-end as Covid-19 vaccines continue to be rolled out, lockdowns are lifted and travel for leisure and business resumes.
“The gap is slowly closing as economies reopen and Eastern growth takes us higher,” Hardy said. Still, he cautioned that a recent spike in Covid-19 cases in India and other virus hotspots could derail the recovery.
Hardy sees demand for jet fuel continuing to lag a rebound in other petroleum products, with demand still expected to be about 1.5 million barrels a day below pre-pandemic levels by year-end.
The shortfall in aviation fuel consumption will be offset by a similar sized 1.5-million-barrel a day increase in use for other oil products, such as petrochemicals used in plastics, Hardy said.
Oil traders and producers rushed to fill up tanks on land and at sea a year ago as the pandemic and government-imposed lockdowns crimped demand.
The price of a key U.S. oil benchmark briefly traded below zero as there was nowhere to store the excess oil.
This week, West Texas Intermediate futures are trading at around $64 a barrel.
Energy traders made huge gains last year storing cheap crude in tanks or ships they owned or leased and selling forward futures contracts at higher prices.
Vitol earned around $3 billion in profit in 2020, according to people familiar with its accounts, the best financial result in its history. The closely-held company doesn’t disclose its annual earnings.
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