Vitol sees OPEC falling short of meeting global oil demand, extending crude’s rally

Anthony Di Paola July 02, 2021

(Bloomberg) --The world’s largest independent oil trader expects crude’s rally to continue on the assumption any OPEC+ output hikes will fail to keep pace with growth in demand.

The Organization of Petroleum Exporting Countries and its allies are deadlocked over a potential ramp-up in production and an extension of their supply deal into later next year. While the group is broadly in agreement over adding 400,000 barrels a day each month for the rest of this year, the United Arab Emirates has not signed off amid a dispute over its production-cuts baseline.

“We’ve had impasses like this before and they’ve been resolved,” Mike Muller, Vitol Group’s head of Asia, said during a daily webinar hosted by Dubai consultants Gulf Intelligence. “Whatever OPEC+ agrees, it will surely be a fraction of the amount needed” to meet growing consumption.

Crude prices have climbed around 50% this year as economies emerge from the coronavirus crisis, reviving fuel demand.

“The scene’s been set for prices to continue to grind higher,” Amir Khan, senior economist at Saudi National Bank, told Bloomberg Television on Sunday. “We’re in an environment where demand is rising for oil. This uncertainty about the supply outlook will feed into higher prices.”

OPEC data show that once-bloated oil stockpiles are now back down to average levels. Inventories will continue to shrink, according to Muller, who said U.S. oil producers including shale drillers also aren’t adding barrels quickly enough.

OPEC+ ministers are due to reconvene on Monday for a third day of talks after failing to reach an agreement last week.

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