Gunvor CEO: Global oil supply is growing faster than demand.
Gunvor's CEO, one of the largest oil traders in the world, stated on Monday that global oil supply is growing faster than demand. Last week, oil prices fell to a three-year-low due to a slowdown in demand growth in China as well as concerns over the global impact of President Donald Trump’s protectionist trade policy. Gunvor CEO Torbjorn Tornqvist told an interviewer on the sidelines an energy conference in Houston that "we still see growth in demand in the world but it's just not as big."
"That's the issue." Tornqvist stated that the demand for diesel and gasoline has plateaued in China, which is the second-largest consumer of these fuels. In China, the rapid growth of electric vehicles has slashed gasoline demand. Meanwhile, a growing number trucks that run on natural gas have impacted diesel demand. He said that the balance between supply and demand is shifting. Organization of the Petroleum Exporting Countries (OPEC) decided to increase production by a small amount each month starting in April. This is to reverse millions of barrels of daily oil production cuts. Tornqvist described the increment as a "rounding mistake". He added that the offline spare capacity of the group continues to have an impact on the market. Tornqvist stated, "I believe that the fact that there is this capacity will always dampen prices."
Brent crude, the global benchmark, was trading below $70 per barrel on Monday after reaching its lowest level in December 2021 at $68.33 last week. Gunvor CEO said that if crude prices drop another $5 or $6, U.S. producers of shale oils are unlikely to increase production.
He said that uncertainty over tariffs, sanctions, and their impact on energy and the economy were contributing to the volatility.
"You create artificial arbitrage. "I don't believe that is good for the long term," he replied when asked by a panel about tariff policy.
Tornqvist said that the tariffs on Canadian Oil, which were paused for one month, would cost about two thirds more. The rest of the costs will be borne by the U.S. refiners, consumers and producers. He does not expect tariffs to affect oil flow, as Canada has limited other options for export. Tornqvist was unsure of how fast sanctions on Russian oil would be lifted in the event that Russia and Ukraine reached a peace agreement over their war.
He said that if the sanctions were lifted Europe would most likely return to purchasing Russian oil and natural gas, but it is unlikely that all gas pipelines damaged or shut down would be brought back online. He said that fuel demand in Southeast Asia continues to increase. (Reporting from Arathy S. Somasekhar, Houston; Editing done by Simon Webb and Marguerita Choy)
(source: Reuters)
