Commodity giant Trafigura: very optimistic about oil and gas prospects

As one of the world's largest commodity trading companies, Trafigura Group (Trafigura Group) said that due to the difficulty of supply to keep up with rapidly growing demand, global oil and gas prices will be higher this winter and beyond.

Ben Luckock, Trafigura’s co-head of oil trading, said in an interview:

"In the future, we will see higher oil prices."

Luckock believes that the market has mispriced the forward oil contracts in the next few years because traders have not realized that oil supply and demand will remain tight for a period of time. He added:

"Deferred crude oil prices, especially in December 2022 and 2023, are very cheap."

The current price of Brent crude oil for delivery in December 2022 is about US$70/barrel, but Luckock believes that if the price of Brent crude oil rises to around US$100/barrel by then, there is no need to be surprised, because in the next two years, Apart from seeing crude oil rise to higher prices, it is difficult for him to foresee other situations.

On Monday, the spot Brent crude oil soared to $80/barrel, reaching the highest price in nearly three years. Trafigura, as the world's second-largest independent oil trader, is second only to the industry leader Victor Group, and has its own views on global energy flows.

In terms of natural gas, Trafigura Group believes that if this winter is colder, leading to increased demand for natural gas in Europe and Asia, the price of natural gas may rise sharply in winter. At present, oil demand has quickly returned to the level before the epidemic. Most traders predict that by the early to mid-term of 2022, oil consumption will reach the level of 2019.

But as demand rebounds, supply may not be able to keep up: American shale oil companies have been restricting output-profitable companies are more willing to pay dividends to shareholders than expanding output. As the US shale oil has been slow to respond to price increases, OPEC+ will be able to continue to "control" the oil market.

Luckock said:

"The U.S. shale oil industry is showing very strong'discipline'. Although the current oil price is about twice what it was a year ago, the number of wells has not increased significantly; although European commodity trading prices have reached historical levels. The highest level, but it is difficult to see natural gas prices fall this winter due to increased production."

But he also pointed out that if the weather is normal this year, the price of natural gas may be lower; but if the weather is cold, the price will rise sharply because of the shortage of stocks.

At present, the price of natural gas in Europe has soared to more than US$25 per million British heat, which is more than 400% higher than the 2010-2020 average level, and is significantly higher than that of the United States, the latter’s natural gas transaction price is about US$5 per million British thermal. hot. Recently, LNG in Asia has changed hands at a price of around US$27 per million British heat, setting a seasonal high.

Luckock had doubted whether Russia, as Europe's largest natural gas supplier, would intentionally tighten the market for political gain. But he "implied" Moscow is already sending as much gas as possible:

"Russia needs to maintain many natural gas fields, domestic inventories are very low, and the'flow' to Turkey has increased significantly. At present, Gazprom is also working hard to increase production."