- The global economic slowdown and fears of a recession were expected to cause significant demand destruction, but that hasn’t happened.
- Economists and researchers at some of the top commodity trading houses now believe demand will remain robust despite potential recessions.
- Next year, the oil market could be heading for a supply crunch, especially if China lifts Covid restrictions and the Fed eases rate hikes.
Global oil demand remains resilient despite slowing economies and is likely to hold up even if recessions materialize, executives at some of the largest commodity trading houses said on Tuesday.
Oil consumption has surprised to the upside in recent months, and there hasn’t been significant demand destruction, as previously expected, economists and researchers at the top traders said at the Argus European Crude Conference in Geneva.
“All the different factors suggest, yes, we may be heading into a slowdown but it will be shorter and shallower than people are expecting,” Saad Rahim, Chief Economist for Trafigura, said at the conference, as carried by Reuters.
The latest data suggest that oil demand is still doing okay, according to Frederic Lasserre, Global Head of Research & Analysis at Gunvor Group.
“We were expecting some demand destruction, it did not really happen. Some countries had subsidies but still. We have been surprised,” Lasserre said at the event.
Both economists expect Brent Crude to trade above $75 per barrel at the end of 2023.
Last week, Trafigura’s Rahim said that slowing economies and interest rate hikes are set to keep investors and traders off risk assets such as crude oil, which could mean that oil prices may not exceed $100 per barrel again this year. Next year, oil prices could rebound to above $100 if China lifts Covid-related mobility restrictions and the Fed slows or pauses rate hikes to try to boost growth.
Looking beyond Q4 2022, however, the oil market is set for a supply crunch and oil price spikes, according to Rahim.
“We’re potentially moving from a world of commodity cycles to a world of commodity spikes because of the under-investment that has taken place in the last decade,” Rahim said at the APPEC conference in Singapore last week.
“My view is that people who were not investing at $100 to $120 a barrel this year aren’t going to be investing when it’s $70 to $90,” Rahim added.
By Tsvetana Paraskova for Oilprice.com
