Vitol, says oil price has bottomed out

Oil markets are signaling that prices have bottomed out even as growth in demand for crude is forecast to slow this year, according to a senior executive at Vitol Group, the world’s largest independent oil trader.

“We’ve come back from some pretty low levels in January this year,” Christopher Bake, a member of Vitol Group’s executive committee, said Monday at a conference in Abu Dhabi. “Especially over the last few weeks, there’s definitely a sentiment in the market that we’ve bottomed.”

Global crude use will rise by 1.2 million barrels a day this year compared with 1.8 million in 2015, Bake said. At the same time, as much as 3 million barrels a day in supply that has been forced off the market in countries including Libya and Iraq could return and alter what Bake called a “fairly fine balance” of supply and demand.

Oil has rebounded after falling to the lowest level in more than 12 years amid signs that a global surplus will ease as U.S. production declines. Futures retreated Monday from the highest close in five months amid signs that the glut will continue as Middle Eastern producers such as Iran boost supply and output capacity.

Benchmark Brent crude fell 36 percent in the last year and was trading as low as $44.26 a barrel on Monday in London. Brent futures for settlement later this year show a month-by-month increase beginning in August, and they exceed $50 a barrel starting in April 2018.

Demand in Asia is “the big question mark going forward,” Bake said. China’s oil use won’t grow as fast as it has over the last 10 years, while India’s consumption may not be as strong as it has been over the past two years, he said.

On the supply side, OPEC nations will continue pumping at record-high levels, and some “politically constrained oil production” in Libya, Nigeria, Yemen and northern Iraq could return to the market, Bake said. He estimated that output of at least 2.5 million barrels a day has been disrupted in these countries.

Force majeure constraints on Forcados crude from Nigeria could persist through June, he said. Royal Dutch Shell Plc declared force majeure — a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control — on shipments from the Forcados oil terminal after a leak forced a suspension of crude loadings in February.