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(Reuters) – OPEC is unlikely to unwind voluntary production cuts in the short term, executives of global commodity trading giants Vitol, Trafigura and Gunvor said at the Energy Intelligence Forum in London on Tuesday.
OPEC+ is discussing a further delay to a planned oil output hike that was due to start in January, two sources from the group said on Tuesday.
Trafigura’s global head of oil Ben Luckock suspects OPEC will again defer its production increase, though probably not that far into the future, as OPEC is unlikely to be satisfied with current prices.
“I think that the OPEC+ organisation have no room to increase” Gunvor CEO Torbjorn Tornqvist said.
Increased oil production, and new discoveries at lower breakeven costs, are keeping prices around $70 a barrel, Tornqvist added, as well as a lack of growth in transport fuels demand in China.
OPEC will likely try to manage the market over the next two to three months, while it waits to see if any current geopolitical aspects are solved, Vitol CEO Russell Hardy said.
Fundamentals suggest a fair value for oil in current range of around $70 a barrel, panelists said, though major geopolitical events could increase volatility and break prices out of that range.
“The sensible price is today’s price, with a massive caveat that we could be massively wrong,” Trafigura’s Luckock said, highlighting uncertainty around incoming U.S. President Donald Trump’s future policy actions.
“The chances of breakouts are probably higher under the new administration,” Luckock added.
Vitol’s Hardy added that although the markets expect rising non-OPEC production in Guyana, Brazil, and the U.S., and high OPEC spare production capacity, to keep prices rangebound in most cases, there is still a risk of reduced supply from possible further U.S. sanctions on Iran, for example.
“There are still a number of events external to regular supply and demand fundamentals that can influence things, and can possibly give the market a little bit more upside,” he said.
Reporting by Robert Harvey, Ron Bousso and Marwa Rashad; editing by Jonathan Oatis
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