Crude Demand Continues to be Strong on Price Slump

LAUSANNE, Switzerland--Oil prices are unlikely to sink to fresh lows this year, major commodities traders said Tuesday, though they stopped short of predicting any significant rebound.

"The low price is now behind us," Torbjorn Tornqvist, CEO of Gunvor Group, told the FT Global Commodities Summit in Lausanne, noting that the current oversupply in the market isn't large and oil prices may have overreacted to the downside.

Though predicting oil prices is notoriously difficult, with hardly any in the industry forecasting the current slump, there are signs that the market could get some support. For one thing, strong oil demand in the first few months of the year is pointing to an uptick in consumption.

Vitol, the world's largest oil trader, sees oil demand increasing by 1.2 million barrels a day this year, almost double its rate of growth last year. BP PLC's trading arm is expecting oil demand to be at the top end of forecasts this year at around 1.4 million to 1.5 million barrels a day.

However, the traders aren't necessarily expecting that this will translate into a significant rebound in price. In fact, large stock builds currently taking place as a result of the supply glut could keep pressure on prices for months after supply and demand return to balance, BP's chief economist Spencer Dale said.

Mr. Dale said he expected the oil market to return to balance as soon as the end of this year, as lower prices damp supply and increase demand.

However, "that's not the problem solved, it just marks the point at which the market stops getting worse," Mr. Dale said.

Write to Sarah Kent at [e-mail]

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