US crude closed below $60 a barrel for the first time in five and a half years, sliding amid new concerns consumption will lag far behind surging output.
Ian Taylor, chief executive of Vitol, the world’s largest independent oil trading house, said on Thursday that official estimates on consumption had been overshooting actual demand and suggested the cheapest oil since 2009 could linger.
“Over the last few months it’s become increasingly clear that demand predictions have been and continue to be consistently on the high side,” he told the Platts Global Energy Outlook Forum in New York.
Vitol daily delivers more than 5m barrels of oil, or about 6 per cent of the global physical market. This gives it a privileged vantage on trends in supply, demand and inventory.
Mr Taylor’s comments echoed others in the physical oil market. Alex Beard, head of oil at the commodities trading house Glencore, said at an investor day on Wednesday that “We are in for a period of low prices and capital discipline across the market”, although he warned that the lower prices went the sharper the eventual rebound would be.
Nymex January West Texas Intermediate, the US oil benchmark, surrendered early gains to end down 99 cents at $59.95 a barrel on Thursday. Brent, the international crude marker, also headed south, falling 56 cents to $63.68 a barrel. Both contracts settled at the lowest levels since mid-July 2009.
The declines came on top of falls of more than $2 on Wednesday after the Opec producers’ cartel said demand for the group’s crude in 2015 would be the lowest in a decade and below current levels.
Official forecasts from bodies including Opec and the US Energy Department contend world oil consumption will rise by 1m barrels per day next year, Mr Taylor said.
But he said that two factors — the weakening of large economies in Asia and Europe and steady improvement in energy efficiency — were challenging these assumptions. Demand will grow by only about 600,000 b/d this year, he said.
Mr Taylor said he himself had both sold crude when it was $5 per barrel and bought it just before the 2008 bubble burst at $140, so “personally, $60 a barrel seems extremely reasonable”.
He added: “I suggest that we might have to live here for a much longer period than perhaps at the moment we’re all expecting.”
Concerns about anaemic demand growth have compounded the effects of Opec’s decision not to tinker with output targets at its latest meeting. The cartel is challenged with booming production from US shale formations.
On Wednesday Saudi Arabia’s oil minister said that the country had no intention of changing its stance and cutting production. “Why should I cut production?” Ali Al-Naimi said at a conference in Lima. “This is a market and I’m selling in a market. Why should I cut?”
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