<article><p class="lead">Oil prices in the $70-80/bl range for the rest of the year "is a reasonable place to set expectations", trading firm Vitol's chief executive Russell Hardy said today.</p><p>"There is probably a little bit more upside," he told the <i>FT Commodities Global Summit</i>. "The next few months will be interesting. We have got Opec kind of holding their card close to their chest at the moment, waiting for the Iranian news to come. We could have something relatively soon."</p><p>A breakthrough in Iran's negotiations with the US to revive the 2015 nuclear deal will pave the way for sanctions on Tehran's crude exports to be lifted and this will be a key consideration for the Opec+ group as it assesses output policy beyond next month.</p><p>"Iranian production is probably going to come back at some time during the September-October-November period," Hardy said. "Opec wants to manage their situation to allow that to happen relatively smoothly. I think the market is reading most of it as a positive sign that Opec discipline and organisation around the market is going to be supportive for prices."</p><p>Hardy thinks $100/bl oil is a possibility but is unlikely in the short-term as there is 5.5mn b/d of spare production capacity "being held back" from the market today. Stock draws and improving demand are helping to create an environment that is "supportive for oil prices", he said."I think $70-80/bl for the rest of the year is a reasonable place to set expectations. Can things go higher than that? Of course they can, but it is probably more likely to be event-driven rather than fundamentals-driven."</p><p>Hardy is not convinced that the oil market is in a supercycle now, unlike other commodities. For oil, "it is a more contained situation than 2008", he said. He expects global oil demand to return to pre-pandemic levels some time in the second half of 2022. Diesel demand is already back at pre-Covid levels, gasoline will get to that point in the fourth quarter and petrochemicals demand is above pre-crisis levels, but jet fuel demand remains way behind, he said.</p><h2>On a plateau</h2><p>Longer-term, Hardy sees oil demand growing to 2030, then plateauing and slightly declining in the following decade, with the fall accelerating in the 2040s. He warns about a possible oil supply gap in 2025-35, which is why Vitol continues to make upstream oil investments at the same time as increasing its presence in the renewable energy space. </p><p>The firm recently agreed to acquire Permian basin acreage through its US upstream subsidiary Vencer Energy. Even so, Hardy is fairly cautious about the recovery of US shale oil output. "Production will probably climb back a little bit", he said. But "it will not be the gold rush that it was before".</p><p>Trading firm Glencore's head of oil marketing, Alex Sanna, echoed some of Hardy's views at the FT summit. He sees oil prices "higher from here" in the next few months, not least thanks to vaccination programmes, with the return of Iranian oil to the market already priced in. He also expects oil demand to reach pre-Covid levels in the latter half of 2022.</p><p class="bylines">By Konstantin Rozhnov</p></article>
