Oil prices will stay low for up to 10 years as Chinese economic growth slows and the US shale industry acts as a cap on any rally, according to the world’s largest independent oil-trading house.
“It’s hard to see a dramatic price increase,” Vitol Group chief executive Ian Taylor told Bloomberg in an interview, saying prices were likely to bounce around a band with a mid-point of $50 a barrel for the next decade.
“We really do imagine a band,” probably between $40 and $60 a barrel, he said.
“I can see that band lasting for five to 10 years. I think it’s fundamentally different.”
The lower boundary would imply little recovery for Brent crude, the global benchmark, which traded for $33.38 early yesterday.
The upper limit would put prices back to the level of July 2015, when the oil industry was already taking measures to weather the crisis.
The forecast, made as the oil trading community’s annual IP Week gathering starts in London, would mean oil-rich countries and the energy industry would face the longest stretch of low prices since the 1986-1999 period, when crude mostly traded between $10 and $20 a barrel.
Vitol trades more than five million barrels a day of crude and refined products — enough to cover the needs of Germany, France and Spain together — and its views are closely followed in the oil industry.
Mr Taylor, a 59-year-old trader-cum-executive who started his career at Royal Dutch Shell Plc in the late 1970s, said he was unsure whether prices have already bottomed out, as supply continued to outpace demand, leading to ever higher global stockpiles.
However, he said that prices were likely to recover somewhat in the second half of the year, towards $45 to $50 a barrel.
For the foreseeable future, he doubts the oil market would ever see the triple-digit prices that fattened the sovereign wealth funds of Middle East countries and propelled the valuations of companies such as Exxon Mobil and BP.
“You have to believe that there is a possibility that you will not necessarily go back above $100, you know, ever,” he said.
The problem is that “there is so much more supply” while the global economy is more efficient in consuming crude. On top of that, Iran is returning to the market and growth in emerging markets, the biggest engine of oil demand, is slowing.
Oil prices plunged after OPEC in November 2014 diverged from its traditional policy of adjusting supply to manage prices, announcing it would maintain output to defend its position in the market.
Vitol's CEO Ian Taylor says we're looking at 10 years of low oil prices. Another lost decade? https://t.co/9YWk15XxzZ— Michael Amon (@michaelkamon) February 8, 2016
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