Oil market to remain tight into 2023 as demand continues to recover: Vitol CEO

Global oil markets will likely remain tight and supportive of higher prices well into 2023 as demand continues to recover from COVID-19 lows despite growing concerns over a global recession, Russel Hardy, the CEO of oil trader Vitol, said June 21.

Vitol still expected to see some 2 million-3 million b/d of global oil demand growth in 2023 despite concerns over "runaway prices", with oil supplies struggling to keep up with the increase, Hardy told the Qatar Economic Forum in Doha.

"It is tough to see markets really giving up much ground until we see some abatement in demand. We are still really not back to 2019 demand levels for gasoline and jet fuel. All in all, that is fairly supportive of prices," he said.

Hardy reiterated recent comments that the current oil supply shortage was a result of chronic underinvestment in recent years which will underpin tight fundamentals for years to come.

But record-high pump prices were the near-term focus of concern, he said, noting low stocks and a lack of available refining capacity.

"The solution is more refineries, running more crudes, to produce more products," he said "The world can solve the problem but things are a little bit tight at the moment."

In addition to low global oil product inventories, China's struggle to contain COVID-19 outbreaks meant its refineries were being underutilized, hitting levels of Chinese oil product exports.

Platts Analytics expects global oil demand growth of 2.5 million b/d next year, about 1 million b/d above the average 2019, pre-pandemic level, but forecasts more price volatility over the risks of slower economic growth and high energy prices.

Russian sanctions

On Russia, Hardy said he saw more Russian crude and oil products heading to Asia next year as Europe shuns Moscow oil, with Asian refiners finding ways to import more discounted Russian oil.

Currently, about half of Russian oil is still heading to Europe and the other half to Asian markets, he said, a split that will change by the end of the year when EU sanctions on Russian oil imports come into effect.

"So, it will be a logistical challenge to ship all that oil to Asia but people are putting those mechanisms in place and they have found willing buyers in India and China who have growing markets and a need for the crude," Hardy said.

"As we go into 2023, we will see [more Russian] crude and products go to Asia. Europe is going to have to import diesel from the Middle East and other areas."

China and India have grown their share of Russian shipped crude to almost 30% and 20%, respectively, a combined growth of more than 1 million b/d on pre-war levels, according to Kpler shipping data.

China's crude imports from Russia hit a historic high of 2 million b/d in May, surging 55% year on year, according to official data, as Chinese refineries became more willing to take the deeply discounted Russian barrels.

Platts Analytics sees Russian supply declining by 2 million b/d by end-2022 as a result of tougher EU sanctions on imports of its oil.