Global energy markets have been pummelled by shocks and are braced for mounting uncertainty on a scale not seen in generations, Vitol’s chief executive Russell Hardy has said.
Russia’s invasion of Ukraine and subsequent disruptions to gas supplies mean a very difficult outlook for the winter is needed than the one adopted at the beginning of the year, the boss of the Dutch energy and commodities trader said.
Speaking at a panel discussion on the opening day of the Energy Intelligence Forum in London, Mr Hardy touched on how the markets have been affected by major geopolitical shifts.
He said a range of factors meant oil companies have had to ramp up supply, with many operating at maximum output by the second quarter.
“Unprecedented uncertainty is the most obvious thing,” he said. “Markets are coping with all kinds of shocks throughout the last nearly 12 months.”
“With [high] gas prices with the war in Ukraine and subsequent high oil price we’re obviously heading for a very different economic outlook in the six months ahead than the outlook we imagined,” he added. “On the oil side, supply is adequate. Of course there’s a big unknown, which is the extent to which Russian oil supply gets affected by the Christmas period and how those various sanctions hit.
“Of course everybody's worried about the next six months. Prices in certain commodities are reflecting that very, very clearly. On the oil picture, the demand side is clearly a concern. At the moment the supply side is in reasonable shape.”
Ben Luckock, co-head of oil trading at Trafigura, also touched on the energy crisis gripping Europe as the colder months roll in. He said policy makers should also be making emergency planning for winter 2023, suggesting it would be naive of them to plan only for the short-term.
He said while “we may well avoid disaster this winter” the same season next year could bring more problems.
“I think we might dodge a bullet with a bit of luck this winter but we should really be focused on the following winter,” he told the audience.
Mr Luckock said the timeframe is too short to have new gas infrastructure built in time to meet the demand across the continent while Russian supplies slow down.
“You are not going to get the significant amount of infrastructure built for Europe that will allow incremental regasification of LNG [liquefied natural gas],” he said.