Vitol, world’s biggest independent oil trader, sees “fairly strong” demand for crude this year, leading to a further drawdown in global stockpiles later in 2018.
Chris Bake, speaking at the International Petroleum Week conference in London on Thursday, according to Financial Times, said robust consumption and production cuts led by OPEC countries had led to a “visible track down in oil inventories.”
“Half a billion barrels of oil has been drawn down in a short period of time,” the trading house’s executive committee member said.
Stockpiles at important oil storage hubs such as Saldanha Bay in South Africa have been “emptied” and crude stored on tankers at sea, such as off the coast of Iran and Singapore, is “all gone.”
Should demand to remain strong and OPEC production stays disciplined, oil inventories should fall further this year. But 2019, he said, is more difficult to predict.
Supply curbs by OPEC and its allies such as Russia have helped to rapidly shrink inventories and bolster crude prices, which last month rose above $70 a barrel. But prices have since eased as global agencies predicted a rebound in US crude output to record rates.
The International Energy Agency has said stellar output from US shale fields is likely to offset robust demand growth and supply cuts by other producers, fueling concerns that falling inventories do not necessarily mean higher prices.
US crude output, which is up 1.3m barrels a day compared to last year, will soon pass Saudi Arabia and could overtake Russia by the end of the year, the IEA said. Global demand is expected to grow by 1.4m b/d in 2018.
There is also an opposing view emerging in the market that US shale oil production could disappoint and may lead to prices overshooting on the upside, particularly as the investment into new production fails to meet demand needs.