APPEC '17: Oil traders turn bullish

By Javier Blas on 9/25/2017

SINGAPORE (Bloomberg) -- When the who’s who of the oil trading industry gathered in Singapore last year for the annual Asia Pacific Petroleum Conference (APPEC), the talk was about a painful year ahead. Of the dozen or so senior oil traders canvassed, all but one expected prices to be capped at about $50/bbl.

A year later, the sentiment has turned more bullish, to an extent.

Stronger-than-expected global oil demand coupled with output cuts by OPEC and non-OPEC producers form the backdrop of this year’s event, which started Sunday evening. Bloated crude inventories have started to shrink, and products markets -- particularly diesel -- are getting tighter. If 2016 was about $50/bbl, it’s $60/bbl this year.

The APPEC conference, which ends on Wednesday, is usually a good barometer to judge the outlook for oil the coming year. After all, Asia is the center of global demand growth. The gathering, which includes a formal conference and endless one-to-one meetings and evening cocktail parties, has just started, but if the early comments serve as a guide, it’s more bullish than in 2016. It helps that oil is about $10 a barrel higher than a year ago.

The upbeat sentiment has limits, however. Firstly, oil traders say that OPEC will need to extend its output cuts beyond March 2018 if it’s to continue drawing down stocks. Secondly, a sustained rise above $60 a barrel is unlikely because that’ll spur a rapid expansion in U.S. shale production.

From now until the end of 2017, the outlook looks bullish, with seasonally stronger demand outstripping supply. The real test, according to the traders, will come by March 2018, when demand will weaken seasonally.


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