Western sanctions on Russia and Iran are creating record volumes of oil stored onboard vessels, preventing a supply glut from forming in global markets, Gunvor Group’s CEO said on Wednesday.
The European Union, United Kingdom and the United States have imposed a raft of sanctions against Russia over its war in Ukraine, with the latest US embargo targeting Russia’s two top oil producers Rosneft and Lukoil last month.
Surplus oil supply has cushioned the impact of trade disruptions caused by the sanctions, keeping markets stable and reducing price volatility, Torbjorn Tornqvist, CEO of Swiss-based commodities trader Gunvor Group, told the ADIPEC energy conference in Abu Dhabi.
However, the sanctions have also led to an "enormous amount" of oil that is dislocated and some of that is being held on tankers, he added.
"This is unprecedented, the size of that. Therefore, obviously, if all sanctions would disappear, this market would clearly be quite oversupplied," Tornqvist said.
Global oil prices fell in October for a third month on fears of oversupply as the Organization of the Petroleum Exporting Countries and their allies are increasing output while production from non-OPEC producers is growing.
Oil supply could exceed demand by two million barrels per day next year, Mercuria’s CEO and co-founder Marco Dunand said at the conference, but added that Western sanctions remain a wild card in curbing supply.
"That probably means that from a two million barrels a day surplus we move more into the one million barrels a day surplus," Dunand said.
"It is true that the (global oil) inventories are low. It is also true that oil on the water is high, so the (supply) glut is forming slowly and probably going to hit the market in the next few months."
(Reporting by Yousef Saba, Nayera Abdallah, Tala Ramadan, Jana Choukeir; Writing by Florence Tan; Editing by Muralikumar Anantharaman, Kim Coghill and Christian Schmollinger)
