Vitol CEO Russell Hardy on Tuesday said that under Joe Biden’s presidency the US would implement stricter environmental policies which will tighten oil supplies long term and support higher prices. For the near term, Biden’s administration might allow the return of Iranian oil to the market, painting a bearish outlook at the end of 2021. The US oil sector is facing underinvestment to counter depleting fields, exacerbated by a global transition toward low-carbon energy.
European oil majors have announced massive cuts in upstream oil and gas. According to Hardy, this trend could expand into the US soon. Oil companies also cut jobs and hoped to divest oil and gas fields and refineries to reduce their debt and cut carbon emissions. Vitol established Vencer Energy in July to look at US upstream assets after a series of bankruptcies among shale companies.
Worldwide oil demand is expected to stand at approximately 96 million bpd during the Northern Hemisphere winter and then increase gradually to around 101 million bpd in the last quarter of next year. This figure, however, remained lower than demand at the end of 2019. Next year, Brent prices are expected to reach $50/barrel, from around $40/barrel recently.
Hardy also noted a gloomy outlook for oil refiners. Global refiners have so far announced to permanently close about 1.6 million-1.7 million bpd of refining capacity. These shutdowns are due to take place by the end of next year to the beginning 2022. The figure can grow further by another 1 million barrels, Hardy said. Recently Shell announced a plan to permanently close its Convent refinery in south Louisiana. The company will also cut jobs and reduce crude processing capacity at its refinery in Singapore.
