Oil prices might have been relatively calm over the last couple of months, but the levers pushing and pulling them have reached “in some cases unprecedented” levels of uncertainty, according to Vitol Group.
Risks including Iran, the U.S.-China trade war and growth in electric vehicles are pulling crude in different directions, resulting in a relatively stable price range, said Giovanni Serio, global head of research for Vitol, the world’s biggest independent oil trader. Ample spare capacity — in OPEC and U.S. shale — is also countering any upward pressure on prices, he said.
“There’s a risk of increasing volatility,” Serio said in an interview on the sidelines of the Asia Pacific Petroleum Conference in Singapore. “Whether you can put a direction to the volatility is your call.”
The lack of clarity is partially down to the fact that no one is sure about future demand levels. The International Energy Agency’s 2018 high-case estimate for where consumption would be in a decade was 20 million barrels a day above its low-demand scenario, Serio said, compared with a range of 6 million barrels a day in its 10-year outlook in 2010.
Geopolitical disputes, a global trade environment that’s been upended by aggressive U.S. policy, and an unprecedented amount of debt returning negative yields are the biggest factors buffeting oil prices, according to Serio. When all these uncertainties come from outside the market, “it’s difficult for oil people in general to appreciate,” he said.
