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Top trading houses speak at commodities conference

Executives from the world’s largest trading houses and mining companies are discussing market trends at the FT Commodities Global Summit this week.

Following are highlights from Tuesday:


“The super cycle is defined by the energy transition, the main driver for the hard commodities like industrial metals. Oil itself, I’m not so sure. We may be in some kind of short term cycle… underinvestment could lead to a shortage in the long term, but that’s a supply constraint rather than very strong demand.”

“There’s a risk that supplies of hydrocarbons go down faster than the alternatives are able to make up for. That’s the real danger.”

Tornqvist sees natural gas playing a long-term role as a transitional fuel and as key to replacing coal, a major source of pollution.

“Coal is the backbone of power generation, and in different parts of the world its use is actually increasing. The nearest replacement is natural gas.”

“(Gases) have a long-term role to play because you can decarbonise them at the field.”

“I think they could be the backbone to create blue hydrogen and ammonia, and you can choose CO2 to be reinjected back in the fields, which would clean up the production. I see great potential… we have the solution and it should be done.”


“We expect demand to be a bit over 100 million barrels per day (bpd) at year end, which is a little bit short of pre-COVID levels.”

“Inventories are back to pre-COVID levels except for China, that still has a buffer. Their inventories are roughly 150 million barrels above pre-COVID levels.”

“I do believe there’s a scenario where oil can go above $100 a barrel but that would imply that there’s no spare capacity or very little left.”

Dunand sees about 6 million bpd of spare capacity, not including Venezuela and Iran.

“Oil will stay above $70 a barrel for a while and then we’ll see how Glasgow (COP26), other commitments and climate change impacts play out.”

If Iran reaches a nuclear agreement with the United States, Dunand expects Iran’s oil production to rise from about 2.5 million bpd to 3.5 mln bpd. He expects this supply to be absorbed because demand is going increase by about 5-6 million bpd.

U.S. shale output will rise by 300,000 bpd by year end and may increase by 1 million bpd next year, he said.

“The market will be able to take it as OPEC+ seems to be disciplined, some countries even struggle to meet quota.”

Mercuria has invested over $500 million in renewable energy so far, Dunand told the conference.

“We would not be investing into a major Arctic project or a major project which will need many years to develop, because we do not think that goes along the line of our philosophy going forward.”


“I find it difficult to make a strong call on much higher future oil prices because it’s really dependent on policies as well.”

“So far, the oil industry is a bit business as usual. If you look at their projections over next ten years, they still think oil demand will grow… but the reality is that oil demand needs to decline before 2030 if we want to tackle climate change.”

“A lot needs to be done instead of empty statements, but there’s no silver bullet for the energy transition. You need more EVs (electric vehicles) faster and that means more electrification faster which is not easy to do.”

“The quickest thing to do is to have a really high price of carbon. That’s the fastest fix because it becomes uneconomic to consume oil and people will focus on electrifying.”


Commodity prices may drop a bit after rising over the last six months due to short-term supply bottlenecks, Weir said. Copper and other metals have recently hit multi-year highs.

“We may see a small setback but on a long-term basis as we see this energy transition taking place, we’re going to see continued demand for commodities. It is metal intensive particularly, so I expect sustained prices or higher,” he said.

Weir said there is a chance the oil price could hit around $100 a barrel in the longer term.

“The issue for oil is not demand… the supply situation is quite concerning. We’ve gone from 15 years of reserves to 10 years. We’ve seen capital expenditure go from five years ago at $400 billion a year to just $100 billion a year.”

Trafigura’s traded oil volumes have hit a new record at over 7 million bpd currently and the firm is focused on building up hydrogen-based fuels.


This year, Hardy sees the oil price moving between $70 and $80 a barrel on the expectation that OPEC+ keeps supply discipline.

Iranian oil is likely to return to the market between September and November.

“We have had those stock draws for a couple of months, the market is heading in the right direction… my impression is it is not a super cycle. With the energy transition, oil demand will peak.”

Hardy predicts global oil demand hitting 105 million-110 million bpd and peaking around 2030. He sees a fast decline after 2040.

Vitol will continue to invest in oil and sees global coal demand potentially hitting a record this year as new power demand outstrips renewable sources.

“Gasoline will catch up to pre-COVID levels in Q4 this year, diesel is there already, aviation fuel demand is a long way behind, while petrochemical is already ahead of 2019 levels.”

He expects oil demand to be fully back to pre-COVID levels in mid-to-second half of 2022.


Sanna said he sees a lot of volatility across metals and oil spurred by the energy transition, but not a commodities super cycle. He added that capital expenditure cuts will put oil markets in OPEC hands.

“The return of Iranian oil is already priced into markets,” he said, adding he expects OPEC+ to increase output gradually to 40 million bpd.

“Refining margins continue to remain under pressure, we have ample capacity available… I’m afraid short-term margins remain under pressure,” he said, speaking of the third quarter as economies slowly recover from COVID-19 lockdowns.

“European refiners will continue to struggle.”

“LNG will be a big growth market for Glencore.”
Source: Reuters (Reporting by Julia Payne and Bozorgmehr Sharafedin; Editing by Jan Harvey)

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