Sommario:As the seismic market events of the past few years begin to fade, top global commodity traders are grappling with a more challenging oil trading environment. From the declining profits of Glencore and
As the seismic market events of the past few years begin to fade, top global commodity traders are grappling with a more challenging oil trading environment. From the declining profits of Glencore and Gunvor Group to the hedge fund boss Pierre Andurand, who has shifted from oil trading to betting on copper and cocoa, the impact of the economic slowdown is felt everywhere. Although industry giants are still profitable, the data is no longer the blockbuster figures seen since 2020.
Ben Luckock, Global Oil Head at Trafigura, one of the world's top crude oil traders, stated at the Asia Pacific Petroleum Conference (APPEC) that OPEC+, led by Saudi Arabia and Russia, postponed its production increase plan last week. However, given the “not very optimistic” balance prospects, a direction for action is needed for next year. OPEC and its allies have been restricting supply to support prices, but the alliance's market share has been taken over by competitors, including U.S. shale oil producers, and the spare production capacity of its member countries has not yet been released.
In the meantime, despite OPEC+ extending its restrictions, oil prices are still under pressure due to concerns about a slowdown in global oil consumption, and Brent crude may fall below $70 a barrel. Both Trafigura and another trader, Gunvor, have stated that due to low demand and ongoing oversupply, oil prices are expected to fluctuate between $60 and $70 a barrel. This stance is unusual for Trafigura, which has long been bullish on the commodity trend.
The U.S. National Hurricane Center predicts that Tropical Storm “Francine” may intensify into a Category 2 hurricane and is expected to make landfall in central Louisiana on Wednesday evening. Bloomberg data shows that dozens of offshore oil platforms and inland refineries are in an uncertain range before the hurricane makes landfall. Earlier, several oil and gas companies recalled workers from offshore platforms. Chevron, ExxonMobil, and Shell are among those taking measures to evacuate workers from vulnerable facilities, suspend drilling activities, and close some wells. According to Bloomberg's calculations based on government data, the predicted path of the storm will affect oil fields producing about 125,000 barrels of crude oil and 300 million cubic feet of natural gas per day.
Brent crude prices rose and then fell on Monday, falling below $71 a barrel at one point, the lowest since mid-March of last year, with a daily drop of 0.5%. Analysts say that the rebound in the early hours of Monday was partly due to the potential hurricane along the U.S. Gulf Coast. The threat of the tropical storm to offshore oil platforms and inland refineries along the Gulf Coast supported WTI crude oil prices throughout Monday.
In recent weeks, Goldman Sachs commodity analyst Daan Struyven has lowered his expected range for Brent crude prices by $5 to $70 to $85 a barrel, citing weakening demand, high inventories, and rising U.S. shale oil production. Morgan Stanley has also revised down its oil price forecast, reflecting expectations of increased supply from OPEC and non-OPEC producers amid signs of weakening global demand. The bank currently expects that while the crude oil market will remain tight in the third quarter, it will stabilize in the fourth quarter and possibly shift to surplus by 2025. Morgan Stanley has lowered its fourth-quarter oil price forecast from $85 to $80 a barrel and currently expects oil prices to gradually fall to $75 a barrel by the end of 2025, slightly lower than the previous estimate of $76.
All of this is not new to the market, and market sentiment is extremely bearish. Fund managers' bullishness on crude oil has dropped to the lowest level in over 13 years. At an important oil conference held in Asia, top traders issued cautious warnings. Trafigura Group said that Brent crude prices could soon fall into the $60 range, and Gunvor Group Ltd. believes there is oversupply.
Jeff Currie, Chief Strategy Officer of Carlyle Group's Energy Path, said in an interview with Bloomberg Television: “In terms of oil, the basic physical situation is still intact, with inventories decreasing. However, what is bearish is the financial market, which is looking to the future, not the present.” However, if a tropical system accelerates in the Gulf of Mexico and destroys some refineries, it could easily cause energy prices to rise again. This would lead to another surge in gasoline prices, causing trouble for the Harris team before the November elections.
So far, even with the recent plunge in crude oil prices to $70 a barrel, the price fluctuation in 2024 has been milder than in previous years. Currently, Brent crude futures are heading towards the smallest annual price range since 2004, and earlier this year, an indicator measuring market volatility touched the lowest level in a decade. This has prompted investors to be less enthusiastic about making big bets on derivatives. Instead, these traders are hiring more people who specialize in winning new business. In addition, there has been a new trend of acquiring assets such as refineries and oil tankers, which can give merchants an advantage.
This week is one of the most important for the oil industry, as oil traders flock to Singapore for industry conferences, with the tough trading environment becoming a key topic. Another reason is the changes in global oil flows due to global conflicts. Sanctions against Russia by the G7 have reduced the amount of crude oil that large traders are willing to buy and sell. However, the crude that would have been shipped to European refineries is now still flowing to Asian customers, often at lower prices.
Traders also have to deal with competition from increasingly sophisticated competitors. Saudi Aramco has recently taken a stake in Chinese refining assets, thus establishing a foothold in a key demand center. Roland Rechtsteiner, head of commodity trading and risk at McKinsey, said: “Many organizations that have traditionally relied on traders to supply or purchase oil are building commercial relationships. Although this increases liquidity and more trading counterparts, it will certainly make it more difficult for merchants to gain new mobility capabilities.”
From the published earnings, it can be seen that the market environment is more severe. Due to the decline in profit margins from oil and coal trading, Glencore's energy department's half-year profit has hit the lowest level since 2018. Meanwhile, Gunvor's shipping and freight department has contributed more to the profits. The company's trades are to a greater extent to cope with the tough market. Gunvor's latest financial performance shows that in the first half of this year, the company's crude oil and petroleum product trading volume has reached a record level. According to an informed source, earlier this year, a petroleum trading team of Freepoint Commodities LLC in Switzerland shrank significantly before the traders left. Freepoint declined to comment.
Another large trader, Trafigura Group, saw a 73% drop in profits in the six months ending in March, although the company did not disclose the specific performance of its oil business. The company's head of oil business, Ben Luckock, said that the lack of trend and the range-bound crude oil prices mean that “trading is not particularly easy.” Vitol Group, the largest independent oil trader, does not publicly report half-year profits. However, the company's CEO, Russell Hardy, said in an interview in Singapore that volatility has weakened. “Volatility has fallen back to a level closer to the mean. The opportunities within trading companies are proportional to this.”
After taking into account the dynamics of the global oil market, the supply and demand relationship, geopolitical factors, and the potential impact of natural disasters, we can conclude that the oil trading market is in an unprecedentedly complex period. Traders and analysts must closely monitor market signals and flexibly adjust strategies to cope with the challenges brought about by price fluctuations and changes in supply and demand. As the global economy gradually recovers from the impact of the COVID-19 pandemic and new energy technologies continue to advance, the future of the oil market will be more variable and unpredictable.
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