Vitol's View | Russell T. Rudy Energy LLC
“World Oil” reports that Vitol, the world’s largest independent oil trader, anticipates a decade of low prices. In an interview with Bloomberg, CEO, Ian Taylor, opined that Vitol anticipates oil trading in a band between $40 and $60 per barrel, bouncing around a mid-point of $50. Taylor cites a slowing Chinese economy as dampening demand. Concurrently, he sees the U. S. shale industry reacting to any potential shortage and insuring a continuing oversupply. Should the Vitol forecast prove accurate, the oil industry will be facing the longest period of depressed prices since 1986-1999.
While unsure whether prices have bottomed out, Taylor said he does anticipate a price rally by the second half of 2016 in the $40-$45 per barrel range. However, he doubts that we will ever see $100 oil again. He attributes this to abundant supply, increasing consumer efficiency, Iran’s return to the world market, and slowing demand in emerging economies.
Taylor sees an agreement between OPEC and Russia to curtail supply as a condition for significant price recovery. While unlikely, he thinks this is a real possibility.
Low prices clearly hurt oil producers, but they do not harm independent traders such as Vitol. Traders actually benefit from volatile prices as well as a prevailing contango. A contango exists when there is a widespread perception that future prices will be higher than current levels. Traders exploit this by buying crude at current prices, storing it, and selling futures contracts against their inventory to lock in the higher prices.
Vitol is owned by its employees and trades 5 million barrels of oil and refined products a day. Since it is not publicly traded, it is not required to publish earnings. However, Taylor did say that 2015 profits will be higher than the previous year’s $1.35 billion.
To read the article in its entirety, please go to http://www.worldoil.com/news/2016/2/08/world-s-largest-energy-trader-sees-a-decade-of-low-oil-prices .
