Vitol, World’s Biggest Energy Trader, Forecasts $100 Oil Price in H2

•With $75/barrel benchmark, Nigeria could save up to $25/bbl

Emmanuel Addeh in Abuja

If the current increase in Nigeria’s oil production is sustained, the country may not find much trouble financing its 2023 budget, with the Vitol Group, the world’s largest energy trader predicting yesterday that oil prices could return to triple digits later this year.

Vitol’s Chief Executive Officer, Russell Hardy, said in a Bloomberg Television interview that as consumption climbs and the market tightens, the price of oil would likely rise to $100 in the second half of 2023.

The firm, which has further extended some of its work to Nigeria operates as an energy and commodities company, and offers refining, trading, shipping, and storage of crude oil and energy products.

 With revenue of $279 billion as of 2021, Vitol is the largest independent energy trader in the world, and would be the sixth-largest company worldwide as measured by revenue on the Fortune Global 500 list at the time.

It has a Joint Venture pact with the Nigeria Sovereign Investment Authority (NSIA) in which it was expected to plough an initial $50 million into projects targeted at cutting back carbon emissions in the country.

Nigeria’s state oil firm, the Nigerian National Petroleum Company Limited (NNPC) had also signed a $1.5 billion prepayment deal led by Standard Chartered and backed by the oil traders Vitol Group.

“Demand is expected to hit record levels in the second half of the year. The prospect of higher prices in the second half of the year, in the sort of $90-$100 range, is a real possibility,” Vitol’s Hardy said in the interview.

Benchmark Brent crude, Nigeria’s oil, is currently hovering around $83 a barrel. Oil has traded within a tight $10 range so far this year as investors weigh a welter of conflicting forces, including the outlook for supplies from Russia, China’s reopening, and the trajectory of monetary policy.

Other trading giants have also outlined bullish views, with Trafigura predicting that prices would head above $90 a barrel and reach $100 at some point this year, and Mercuria Energy Group anticipating price gains that will extend into 2024. Some of the biggest names on Wall Street such as Goldman Sachs Group Inc. and Morgan Stanley also forecast a rally in the second half.

Oil inventory levels look “reasonable” over the next months but should tighten after that, with this year’s oil demand set to increase by 2.2 million barrels per day over 2022 levels, according to Vitol estimates.

Most of that would be from diesel, naphtha and liquid petroleum gas, with gasoline and jet fuel “both still playing catch up,” Hardy said in a separate interview.

“With jet fuel, we anticipate we’ll end the year close to a half a million barrels a day less than 2019, because the schedules are just not going to get to where they were,” he said.

That puts pressure on strained production, with Organisation of Petroleum Exporting Countries (OPEC) “relatively flat out” in terms of output and with Russia’s logistical difficulties in bringing oil to market.

Recently Nigeria has been on its way to meeting its OPEC production quota, with production rising from a multi-decade low of 900,000 barrels per day to about 1.3 million bpd. The NNPC puts the production figure at over 1.6 million bpd.

“You don’t have much room on the supply side is the reality, so the potential for a rally is certainly there,” Hardy added.

Sanctions on Russia have created some logistical issues as cargoes are re-routed on longer routes to buyers in Asia, prompting Moscow’s recent warning that it will curb production.

 However, Europe has comfortable inventory levels and isn’t facing strain from the upheaval, Hardy said.

Over the long-term, plans for “enormous investment” in renewable energy are bringing forward the point at which global oil consumption ultimately tops out, which is likely to come around the end of the decade, he added. Investment is still needed in oil supplies in the meantime.  “We’re on a very rapid path to de-carbonisation,” Hardy said.

Nigeria’s authorities recently moved to ramp up oil production in the country and curb massive oil theft which have hobbled output for over a year.