Gunvor CEO Says Oil Oversupply Finally Emerging

An oil market surplus that’s long been anticipated by investors is finally showing signs of emerging, a fact that may start to drive down crude prices, the boss of one of the world’s top energy traders said.

“It looks like we are now moving into a bit of a different market,” Torbjorn Tornqvist, chief executive officer of Gunvor Group, said in an interview in London. “We have heard it before and people have been burned on that. But this time around, at this stage, I think there’s a bit more substance in the oversupplied narrative.”

The International Energy Agency said earlier that the world is set for a record surplus of 4 million barrels a day in 2026 as OPEC+ nations — in addition to countries outside the producer group — boost output. It said cargoes are starting to build up at sea, a sign of oversupply. Tornqvist’s own estimate is for a surplus about half that size next year — still a substantial overhang.

As such, oil prices should be heading lower, even if the market is unlikely to create a so-called supercontango that can make storage of commodities very profitable, according to the CEO.

“There’s a great deal more oil hitting the market at the time where there is no additional demand for it,” Tornqvist said Tuesday. “And on top of that, you obviously have renewed trade tensions.”

Last week, crude in the US plunged below $60 a barrel for the first time since May. It traded below $59 on Tuesday.

Tough Trading

Some of the world’s top oil companies reported a tougher trading environment in the second quarter as geopolitical uncertainty created the wrong kind of volatility — decoupled from supply-and-demand fundamentals.

Tornqvist said geopolitics are generating smaller oil-price premiums as tensions in key producing Middle East nations have started to ease. A lower price dynamic affects what projects Gunvor is willing to fund in terms of prepayments, he said, adding that the “uncertainty generally is meaning that you have to be a bit careful with the risk you’re applying.”

Tornqvist’s assumption of oversupply next year is predicated on big producer nations pumping as much as they’re expected to — something that might not materialize in practice.

“Let’s assume that Saudi Arabia is going to move towards their quotas and everything else goes well; I think we are talking about a couple of million barrels of overhang,” he said. “The question is, then: Is part of that going to be mitigated by a more rapid Chinese stock-build?”

LNG Surplus

Liquefied natural gas is another market where Gunvor sees a looming oversupply. The company is one of the biggest independent traders of LNG, and has made commitments to take the fuel from a number of US projects that are yet to be developed.

Some projects that are working toward a final investment decision may be postponed as the US, Qatar, Canada and Mozambique look to deliver a flood of new production to the market from next year, Tornqvist said. “There is no way in the world that demand will grow that fast,” he said.

Many liquefaction projects on the US Gulf Coast are predicated on a gap persisting between low domestic gas prices and higher international benchmarks. That may not last as American exports rise along with those from elsewhere, according to Tornqvist.

Back in August, Gunvor reported a 71% slump in first-half profit as it struggled to make money on the erratic price moves triggered by US trade policy and the conflict in the Middle East. The second half of the year has so far “gone a bit better,” Tornqvist said.

“You’re looking at a difficult trading landscape,” he said. “For us simply it has been very hard to read the market, so we have simply traded less, which is fine.”

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