Some of the world’s biggest oil traders warned on Wednesday that geopolitical risks have risen to the highest level in years, supporting prices that have climbed towards $60 a barrel.
Ian Taylor, the chief executive of Vitol, the world’s largest independent oil trader, said the takeover of disputed northern Iraqi oilfields by federal forces this week could lead to lower exports from the region, further tightening a market where stocks have been falling.
“There is a risk exports are going to come down. I’m not sure how much is going to be loaded.”
Vitol is one of five trading companies that has extended substantial cash-for-crude loans to the Kurdistan Regional Government — which had controlled the disputed oilfields since 2014 — alongside rivals Glencore, Trafigura, Petraco and Russia’s Rosneft.
Oil flows on the Kurdish-controlled pipeline that carries crude from the north of the country to international markets fell by roughly half on Wednesday to about 250,000 b/d.
Kurdish officials have indicated they want oil from both their fields and those now controlled again by Baghdad to keep flowing, but local reports suggest workers on two fields have not shown up because of the uncertainty in Iraq’s disputed territories. Aside from northern Iraq, US President Donald Trump’s more aggressive approach to Iran has also raised questions about oil from the country, with sanctions on its energy industry only lifted two years ago.
Bob Dudley, chief executive of BP, the oil major with one of the most powerful trading arms in the industry, said geopolitical risks were clearly rising and were back in focus for a market cushioned during the oil decline by excess stocks.
Asked if prices could go above $60 a barrel for the first time in two years, Mr Dudley said: “I think the world has put aside geopolitical risk for a few years now. We’re starting to see that again effective in the price. But if you look just at the balance of supply and demand I think it [the oil price] is about in the right place.’’
Brent crude oil was trading below $58 a barrel on Wednesday and remains close to its highest level this year of $59.49. Traders and industry executives, who were speaking at the Oil & Money conference in London, remain cautious, however, about whether oil can make further gains.
Crude prices are already up 30 per cent since June, buoyed by Opec and other producers freezing output. However, higher prices are expected to encourage more drilling by the US shale industry. Alex Beard, head of Glencore’s 6m barrel a day oil trading business, said he expected oil prices still to be around $60 a barrel in 12 months’ time, a view rival trading executives at the event largely concurred with.
Jeremy Weir, chief executive of Trafigura, said strong demand growth and what he predicted would be a weakening of the US dollar should provide support for oil prices, even in the face of the US shale industry. He warned that eventually supplies would face a “crunch” because of the collapse in oil investment since prices fell from $100 a barrel three years ago.
Vitol’s Mr Taylor, despite warning of rising risks, had the most bearish medium-term projection for oil prices and he expected crude to “be closer to $40 than $60” in 12 months’ time, predicting US oil production was rising too quickly to sustain the rally.
Source: www.ft.com
