London — Any potential U.S. strategic oil stocks release will only relieve stress in the market for the year-end but 2022 will remain tight, Vitol’s CEO told the Reuters Commodities Summit.
U.S. energy secretary Jennifer Granholm said this week that a sale from the U.S. Strategic Petroleum Reserve (SPR) may be authorised as oil prices soar.
Vitol Chief Executive Russell Hardy said the market looked reasonably tight for the next 12 months as demand returns to normal with easing COVID-19 restrictions
The Organisation of Petroleum Exporting Countries and its allies, known as OPEC+, decided to stick to its plan to progressively increase production by 400,000 barrels per day (bpd) each month, ignoring U.S. calls to speed up.
“Crude inventories are low, backwardation in the crude market is by and large justified, product inventories are also very low…There’s not an enormous amount of spare refining capacity to produce more products,” Hardy said.
He said spare oil capacity, about 2-3 million bpd, would tighten next year as the market steadily eats into it.
“We’re at about 2019 (oil) demand levels now and…Q1 2022 is likely to be the first quarter where we exceed 2019 demand,” he said, though jet fuel and U.S. gasoline demand remain laggards as people continue to work from home.
Hardy expects U.S. shale output to rise by no more than 1 million bpd by December next year.
On the natural gas side, Hardy said he remained concerned about long-term supplies as fresh demand, particularly for liquefied natural gas, will come from Asia. Global gas prices spiked last month with European wholesale benchmark prices, Dutch TTF, rising as much as 400% versus January.
For more on the Reuters Commodities Summit.
- Reuters (Reporting by Julia Payne and Ahmad Ghaddar, Editing by Louise Heavens and Emelia Sithole-Matarise)