Crude Oil Trading Giant Vitol: Oil Prices May Stay Above $100 for a Long Time

Russell Hardy, CEO of Vitol Group, the world's largest independent crude trader, believes oil prices could stay above $100 a barrel "for a long time" over the next six to nine months as global demand hits a new record this year.

Crude oil prices had surged to within a few dollars of that level earlier this month. Hardy said the market will become tighter as crude demand continues to recover from the impact of the pandemic, with daily oil consumption well above pre-coronavirus levels by the end of 2022.

"(Global crude oil consumption) is likely to exceed 100 million barrels a day this year," he said, and if travel continues to normalize, "demand will surge in the second half of the year."

"More crude is needed," Hardy said, and with demand at the end of the year rising to 1 million or 2 million barrels per day more than at the end of 2019, "the whole system is going to be pretty tight."

At present, a price structure known as "backwardation" in the crude oil futures market is evidence of the market's nervousness. The so-called "spot premium" refers to the price of oil for near-term delivery will be higher than the contract price for future delivery.

This model is currently prevalent in crude oil, diesel, natural gas and coal trading.

Hardy said that while crude supplies are growing, they are not as fast as consumers need them.

U.S. shale oil production is growing, but not yet at boom-time levels. Funding constraints and staffing shortages at drillers also hampered production, Hardy said.

He said that OPEC+ is gradually increasing production, and the nuclear deal with the United States may allow Iran to produce an additional 1 million barrels of oil per day, but these have been taken into account in the supply of the second half of this year.

"Eventually, we're going to run out of spare capacity," he said. "That's what the market is trying to figure out -- how worried it should be about this situation."