CERAWEEK Global oil supply growth is outstripping demand, Gunvor CEO says
HOUSTON, March 10 (Reuters) - Global oil supply growth is outstripping demand, the CEO of one of the world's largest oil traders Gunvor said on Monday.
Oil prices hit a three-year low last week due to slow demand growth in China and concerns about the impact on global economic growth of U.S. President Donald Trump's protectionist trade policies.
"We still see demand growth in the world, but it's not that big," Gunvor CEO Torbjorn Tornqvist said in an interview with Reuters on the sidelines of an energy industry conference in Houston.
"That's the problem."
Demand for gasoline and diesel has reached a plateau in China, the world's second largest consumer, Tornqvist said. The rapid rollout of electric vehicles in China has eaten into gasoline demand, while a growing number of trucks running on natural gas has hit diesel demand.
The balance of supply and demand was loosening, he said. The Organization of the Petroleum Exporting Countries decided to make small monthly increases in output from April onwards as it seeks to roll back millions of barrels per day of cuts.
That increment was so small it was a "rounding error," Tornqvist said. However, the spare capacity that the group has offline continued to weigh on the market, he added.
"I think the fact that you do have that capacity will always be a damper on prices," Tornqvist said.
Global benchmark Brent crude was trading under $70 a barrel on Monday, after hitting its lowest level since December 2021 last week at $68.33.
If crude prices fall another $5 to $6, it is unlikely that U.S. shale oil producers would further grow output, the CEO added.
Uncertainty over tariffs and sanctions and their impact on the economy and the energy industry were contributing to volatility, he said.
"It's uncertainty," he said. "There are so many variables here. We have a bit of risk off everywhere."
Tornqvist said he was unsure how quickly sanctions on Russian oil could be lifted if Russia and Ukraine come to a peace deal over the war.
Europe would likely go back to buying Russian oil and gas if sanctions were lifted, he said, but it was unlikely that all damaged or shutdown gas pipelines would come back online.
Fuel demand in Southeast Asia was a bright spot, and continues to grow, he said.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Telegraph
29 minutes ago
- Telegraph
NHS faces paying more for US drugs to avoid future Trump tariffs
Britain faces paying more for US drugs as part of a deal to avoid future tariffs from Donald Trump. The NHS will review drug pricing to take into account the 'concerns of the president', according to documents released after a trade agreement was signed earlier this year. White House sources said it expected the NHS to pay higher prices for American drugs in an attempt to boost the interests of corporate America. A Westminster source said: 'There's an understanding that we would look at the drug pricing issue in the concerns of the president.' The disclosure is likely to increase concerns about American interference in the British health service, which has long been regarded as a flashpoint in trade talks. It comes after Rachel Reeves announced a record £29 billion investment in the NHS in last week's spending review. The Chancellor's plans will drive spending on the health service up towards 50 per cent of all taxpayer expenditure by the mid-2030s, according to economists at the Resolution Foundation. The Telegraph has also learnt that under the terms of the trade deal with America, the UK has agreed to take fewer Chinese drugs, in a clause similar to the 'veto' given to Mr Trump over Chinese investment in Britain. The White House has asked the UK for assurances that steel and pharmaceutical products exported to the US do not originate in China, amid fears the deal could be used to 'circumvent' Mr Trump's punishing tariffs on Beijing. Mr Trump is enraged by how much more America pays for drugs compared with other countries and considers it to be the same issue as he has raised on defence spending. Just as the US president has heaped pressure on European nations to increase the GDP share they allocate to defence, he thinks they should spend more on drug development. An industry source said: 'The way we've been thinking about it and many in the administration have been thinking about it, it's more like the model in Nato, where countries contribute some share of their GDP.' Britain and the US 'intend to promptly negotiate significantly preferential treatment outcomes on pharmaceuticals and pharmaceutical ingredients', the trade deal reads. Pharmaceutical companies are also pushing for reductions in the revenue sales rebates they pay to the NHS under the voluntary scheme for branded medicines pricing, access and growth (VPAG) – a mechanism that the UK uses to make sure the NHS does not overpay. Non-US countries are 'free-riding' Last week, Albert Bourla, Pfizer's chief executive, said non-US countries were 'free-riding' and called for a US government-led push to make other nations increase their proportionate spend on innovative medicines. He said White House officials were discussing drug prices in trade negotiations with other countries. 'We represent in UK 0.3pc of their GDP per capita. That's how much they spend on medicine. So yes, they can increase prices,' Mr Bourla said. Industry sources said there was no indication yet on what the White House would consider to be a fair level of spending. Whatever the benchmark, Britain will face one of the biggest step-ups. UK expenditure on new innovative medicines is just 0.28pc of its GDP, roughly a third of America's proportionate spending of 0.78pc of its GDP. Even among other G7 nations, the UK is an anomaly. Germany spends 0.4pc of its GDP while Italy spends 0.5pc. Most large pharmaceutical companies generate between half and three quarters of their profits in the US, despite the fact that America typically makes up less than a fifth of their sales. This is because drug prices outside of the US can cost as little as 30pc of what Americans pay. Yet, pharmaceutical companies rely on higher US prices to fund drug research and development, which the rest of the world benefits from. A month ago, Mr Trump signed an executive order titled 'Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients', which hit out at 'global freeloading' on drug pricing. It stated that 'Americans should not be forced to subsidise low-cost prescription drugs and biologics in other developed countries, and face overcharges for the same products in the United States' and ordered his commerce secretary to 'consider all necessary action regarding the export of pharmaceutical drugs or precursor material that may be fuelling the global price discrimination'. Trung Huynh, the head of pharma analysis at UBS, said: 'The crux of this issue is Trump thinks that the US is subsidising the rest of the world with drug prices. 'The president has said he wants to equalise pricing between the US and ex-US. And the way he wants to do it is not necessarily to bring down US prices all the way to where ex-US prices are, but he wants to use trade and tariffs as a pressure point to get countries to increase their prices. 'If he can offset some of the price by increasing prices higher ex-US, then the prices in America don't have to go down so much.' Mr Huynh added: 'It's going to be very hard for him to do. Because [in the UK deal] it hinges on the NHS, which we know has got zero money.' Under VPAG, pharmaceutical companies hand back at least 23pc of their revenue from sales of branded medicines back to the NHS, worth £3bn in the past financial year. The industry is pushing for this clawback to be cut to 10pc, which would mean the NHS would have to spend around 1.54bn more on the same medicines on an annual basis. The Government has already committed to reviewing the scheme, a decision which is understood to pre-date US trade negotiations. A government spokesman said: 'This Government is clear that we will only ever sign trade agreements that align with the UK's national interests and to suggest otherwise would be misleading. 'The UK has well-established and effective mechanisms for managing the costs of medicines and has clear processes in place to mitigate risks to supply.'
The Guardian
an hour ago
- The Guardian
European leaders plan to ask Donald Trump to justify his confidence of Israel-Iran ceasefire
European leaders gathering for a G7 summit with Donald Trump in the Canadian Rockies plan to spend the opening day asking Donald Trump to justify his confidence that Israel and Iran will make a deal that will mean 'peace soon'. As the military exchanges worsen and the death toll mounts on both sides, European leaders are intending to pin the US president down on his whole Iran strategy, including getting a definitive response on whether he will use his influence over Israel's prime minister, Benjamin Netanyahu, to call a ceasefire, or instead let the war run its course. Trump's largely unsubstantiated remarks about 'peace soon' suggest the US president surprisingly believes a ceasefire is imminent. This would allow the rescheduling of US talks with Iran on its civil nuclear programme that had been set for Sunday but were cancelled after Israel launched its assault on Thursday night. The Israel-Iran hostilities – and their potential to upend the world economy – have at least initially usurped the G7 summit agenda, which had been set to be dominated by disputes over the war in Ukraine and US tariffs. In a bid to avoid public conflict, Canada, the summit host, has dropped the idea of a joint communique, and wants the seven leaders to focus on critical mineral supply lines, artificial intelligence, China and energy security. A total of 15 world leaders are due to attend the two and a half-day gathering in Kananaskis, just south of the Canadian resort town of Banff. In a close echo of Europe's largely unavailing efforts to make Trump more resolute in demanding a ceasefire from Russia in Ukraine, European leaders want to see if Trump has a plan for de-escalation in Iran. So far they have found Washington's messages to be contradictory, possibly reflecting divisions inside the administration. The French president, Emmanuel Macron, the German chancellor, Friedrich Merz, the Canadian prime minister, Mark Carney, and the UK prime minister, Keir Starmer, are trying to converge on a common line on Iran that goes beyond broad calls for de-escalation and restraint. Only Macron has attended a G7 summit before. On the way to the summit, which formally starts on Monday, Merz called for diplomacy to be given space, but added Iran cannot have nuclear weapons, and urged the country to stop bombing civilian targets in Israel. France, Germany and the UK, previously closely involved in the talks on Iran's nuclear programme, have been left in the cold by Trump, who insisted on seeking a bilateral deal with Iran. With so many pressing issues on the agenda, Europe will be cautious in deciding how much political capital to expend on calls for a ceasefire. Iran's foreign minister, Abbas Araghchi, has said Israel's attacks were intended to sabotage diplomacy and that Iran's counterattacks will cease as soon as Israel's barrage ends. 'If the aggression stops, our reaction will also end,' Araghchi briefed foreign diplomats in Tehran on Sunday. Tehran denied a Cypriot claim that it had been asked to send private messages to the US, or that it had told intermediaries that the talks due to have been held in Oman would have been productive. Trump, as he has in the past, has blown hot and cold, praising Israel's offensive as excellent while denying Iranian allegations that the US has taken part in the attacks – an assurance Iran does not find credible. He warned Tehran not to widen its retaliation to include US facilities or interests. Sign up to Headlines Europe A digest of the morning's main headlines from the Europe edition emailed direct to you every week day after newsletter promotion Speaking after a phone call with the Russian president, Vladimir Putin, he said 'we can easily get a deal done between Iran and Israel, and end this bloody conflict.' He gave no details, but the sticking point in the talks had been whether the US would permit Iran to retain a residual domestic uranium enrichment program. Iran insisted that despite the rapid increase in its highly enriched uranium stockpile, its nuclear programme remains entirely civilian in purpose. Israel claims Iran had a covert programme that represented a threat to its existence, and might even have been on the verge of giving terrorist groups access to nuclear weapons. The 2015 Iran nuclear deal, to which Iran broadly wished to revert, allowed Iran to enrich at low purity levels and be subject to monitoring. Europe's fear is that the conflict is quickly spiralling out of control, and the Israeli government's agenda is not just to expunge any traces of Iran's nuclear sites, but also to attempt to trigger regime change in Tehran, including by assassinating not just its military but political leadership. Israel has formally denied this. Sir Richard Dearlove, the former head of MI6, said: 'I think regime change is on the cards. I think the Israelis will take out the supreme leader if they can, as they took out [Hezbollah leader] Hassan Nasrallah in Beirut.' There will be growing pressure on Iran's current leadership to conclude that only nuclear weapons can protect Iran, making it more likely that the west would support an attempt to engineer the fall of the theocratic regime. With its 'axis of resistance', or forward defence strategy, in disarray due to assaults on Hamas and Hezbollah, and with Israel enjoying near impunity in the skies above Iran, Tehran is left dependent on its missile supply stock holding out and the security of its Fordow nuclear plant buried deep underground in the mountains north-east of Qom.
Reuters
2 hours ago
- Reuters
Israel's inflation rate eases more than expected to 3.1% in May
JERUSALEM, June 15 (Reuters) - Israel's annual inflation rate eased more than expected to 3.1% in May, official data showed on Sunday, although it is still slightly above target and the escalation of the country's conflict with Iran poses additional risks to the outlook. Inflation (ILCPIY=ECI), opens new tab eased from 3.6% in April when it was boosted by a spike in airfares. The May rate was below expectations of 3.4% in a Reuters poll and stayed above the government's 1%-3% annual target range. Government officials have largely blamed war-related supply issues for a spike in inflation over the past year, even as price pressures eased globally. Israel's central bank believes demand is also helping to keep prices high. It will now be watching to see how the sudden escalation in Israel's conflict with Iran in recent days, which has already pushed oil prices higher, affects overall prices. Israel's annual inflation rate reached 3.8% in January, its highest level since September 2023. The central bank in April projected a 2.6% rate for 2025. On a monthly basis, the consumer price index (ILCPI=ECI), opens new tab fell by 0.3% in May from April, after a 1.1% rise the prior month, led by declines in the cost of transport and telecommunications, fresh vegetables and housing services, the Central Bureau of Statistics' data showed. These were partly offset by higher prices of fresh fruits, clothing, entertainment, health and food. A Reuters poll had expected a 0.1% rise month-on-month. The Bank of Israel on May 26 held its benchmark interest rate at 4.5% due to inflation worries stemming from Israel's war with Hamas militants in Gaza. A day later, Bank of Israel Governor Amir Yaron told Reuters that monetary policy needed to remain "cautious" given the uncertain geopolitical situation and near-term inflation environment, with policymakers ready to delay any rate cuts until inflation eased. The next policy decision is slated for July 7.
