Brent crude, the international benchmark, has already reached a two-year high of $73 a barrel in London and could rise to $78 later this year, said Vitol Group Chief Executive Officer Russell Hardy. The demand recovery is healthy and consumption will reach pre-Covid levels next year, said Alex Sanna, head of oil and gas marketing at Glencore Plc.
The two men, who spoke at the FT Commodities Summit, didn’t predict a so-called “supercycle” that could result in a sustained surge in prices. Crude will only reach $100 a barrel if the Organization of Petroleum Exporting Countries and its allies choose to force it that high, said Hardy.
“It is not a supercycle, because the energy transition tells us demand will peak and drop,” said Hardy.
Trafigura CEO Jeremy Weir, speaking at the same event, was even more bullish. He predicted sustained high prices for a range of commodities, including a chance of $100-a-barrel crude due to lack of supply.
Global oil markets have just gone through the most turbulent year in their history due to the coronavirus. While the successful rollout of vaccines is allowing economic activity to return close to normal in many developed countries, energy prices are unlikely to be heading for a period of tranquility, the traders said.
An uneven recovery in fuel consumption, a lack of investment in new oil fields and the disruption caused by the transition to low-carbon energy are likely to spur greater price swings, they said.
“I believe in spikes in demand and regulatory changes, and that is going to create a lot of volatility,” Sanna said.
Hardy predicted that oil consumption will continue to rise for years to come, reaching 105 million to 110 million barrels a day by 2030. Under-investment caused by last year’s price slump means “there is going to be a gap between 2025 and 2035 in terms of supply and demand.”