The CEO of Gunvor, one of the largest oil trading companies globally, has indicated that the growth in oil supply is currently exceeding demand. This situation has contributed to a significant drop in oil prices, which recently reached a three-year low.
The decline is attributed to slow demand growth in China, coupled with worries about how U.S. President Donald Trump’s protectionist trade policies might affect the global economy. Torbjorn Tornqvist, the CEO, highlighted during an interview that while there is still some demand growth, it is not substantial enough to keep pace with supply increases.
He noted that the demand for gasoline and diesel in China, the second-largest consumer of oil, has stagnated. This is largely influenced by the surge in electric vehicles and the rising adoption of natural gas-powered trucks, which have both significantly reduced gasoline and diesel demand.
To address the disparity between supply and demand, OPEC has decided on gradual monthly increases in oil output starting in April. However, Tornqvist described these increases as minimal, essentially “a rounding error,” and mentioned that the excess production capacity held by OPEC continues to exert downward pressure on prices.
Current trading for Brent crude is below $70 per barrel, hovering near levels not seen since December 2021. Tornqvist added that if prices sharply decline further, particularly by $5 to $6, it would likely prevent U.S. shale oil producers from increasing their output.
Moreover, market volatility stemming from uncertainties about tariffs and sanctions affects the energy sector. Tornqvist discussed the implications of suspended tariffs on Canadian oil, mentioning that most of the resulting costs would be incurred by U.S. refiners and consumers, while producers would absorb the remaining share.
He also expressed skepticism about the rapid removal of sanctions on Russian oil should peace be achieved in Ukraine, indicating a complex landscape for future trade. On a more positive note, he mentioned that fuel demand in Southeast Asia continues to rise.