Crude prices will have little room to rise in the next quarter because the recovery in global demand is slowing due to new coronavirus-related restrictions on the economy, according to Vitol Group executive committee member Chris Bake. “The conventional wisdom going into the fourth quarter was that things were going to improve,” Bake said on a conference call hosted by Dubai consultant Gulf Intelligence. “It doesn’t feel like we have a huge catalyst,” and demand is more “uncertain,” he said. Vitol is the world’s biggest independent oil trader.
Bake’s comments appear more bearish than those the company’s chief executive officer made 11 days ago. Renewed curbs on travel and social gatherings across Europe, along with the tapering of state support packages for companies, are having a chilling effect on demand for crude, just as the OPEC+ group of producers begins to consider the next easing of its self-imposed limits on output.
Oil prices fell last week, with both Brent and U.S. crude holding above $40 a barrel. After the coronavirus pandemic crushed demand earlier this year, the Organization of Petroleum Exporting Countries and partners including Russia agreed in April to cut production, sparking a market revival. Benchmark Brent, however, is still down about 36% in 2020.
The global oil-refining market is “incredibly squeezed,” with large stockpiles outweighing weak demand, Bake said. Plans for additional capacity in coming months may force older refineries out of the market, he said.