Other trading giants have also outlined bullish views, with Trafigura predicting that prices will head above $90 a barrel and reach $100 at some point this year, and Mercuria Energy Group anticipating price gains that will extend into 2024. Some of the biggest names on Wall Street such as Goldman Sachs Group Inc. and Morgan Stanley also forecast a rally in the second half.
Oil inventory levels look “reasonable” over the next months but should tighten after that, with this year’s oil demand set to increase by 2.2 million barrels per day over 2022 levels, according to Vitol estimates. Most of that will be from diesel, naphtha and liquid petroleum gas, with gasoline and jet fuel “both still playing catch up,” Hardy said in a seperate interview.
“With jet fuel, we anticipate we’ll end the year close to a half a million barrels a day less than 2019, because the schedules are just not going to get to where they were,” he said.
That puts pressure on strained production, with OPEC countries “relatively flat out” in terms of output and with Russia’s logistical difficulties in bringing oil to market.
“You don’t have much room on the supply side is the reality, so the potential for a rally is certainly there,” he said.
Sanctions on Russia have created some logistical issues as cargoes are re-routed on longer routes to buyers in Asia, prompting Moscow’s recent warning that it will curb production. However, Europe has comfortable inventory levels and isn’t facing strain from the upheaval, Hardy said.
Over the long-term, plans for “enormous investment” in renewable energy are bringing forward the point at which global oil consumption ultimately tops out, which is likely to come around the end of the decade, he added. Investment is still needed in oil supplies in the meantime.
“We’re on a very rapid path to de-carbonization,” Hardy said.