The oil industry’s biggest party is properly back in London for the first time since the pandemic, and the hot topic will be whether prices are set for a major rally.
As traders gather in cocktail lounges and luxury hotels in Mayfair for International Energy Week, two questions will top the agenda: whether China’s economic reopening can bolster demand and whether sanctions on Russia they will eventually reduce the energy giant’s supply.
Oil prices have been stuck in a 2023 torpor, with Brent futures hovering around $85 a barrel. However, as China revives economic activity and the world’s travel habits increasingly return to normal, trading giants such as Trafigura and Mercuria Energy Group see room for a rebound.
“Russian cuts and Chinese demand will be the two biggest talking points,” said Amrita Sen, chief oil analyst at London-based consultancy Energy Aspects Ltd. world” as Asia leads the increase in demand.
After a low-key gathering last year, the bars of Shepherd Market, between two of London’s royal parks, will once again be bustling with traders and brokers from around the world. Middle Eastern state oil companies are renting out five-star hotels along Park Lane for evening events.
But while hydrocarbons will dominate conversations at social events at night, their presence at the formal conference during the day is diminishing.
Many traders still refer to the event by its former name, IP Week, with the initials of International Petroleum, but its organizers, the Energy Institute, renamed the conference a few years ago as International Energy Week .
Where the panels were once dominated by oil executives and traders, more recently there has been a growing focus on the energy transition and sustainable finance. BP Plc CEO Bernard Looney, one of the few oil CEOs scheduled to speak, has been at the forefront of the shift away from fossil fuels.
However, BP moved away from some of its green aspirations this month and turned to oil and gas as consumption recovers from the pandemic and a private investment industry struggles to keep pace. This mismatch is fueling bulls’ hopes of a return to $100 oil later this year.
Global benchmark Brent has traded in a range of just over $10 a barrel for much of the year as rising US inventories take crude away from volatility that defined 2022, when Brent rose to a near-record high of $139.
China Impulse
That could be about to change as a recovery in consumption from China, the world’s biggest crude importer, pushes global demand to record levels later this year. Chinese demand for jet fuel alone is expected to rise nearly 30% through August to 908,000 barrels per day, according to BloombergNEF.
Alongside the revival, traders will also try to gauge how sanctions on Russia’s exports of refined fuels and crude oil are playing out. Two false dawns emerged in recent months when expected price peaks failed to materialize with the initiation of sanctions on both.
Moscow has said it plans to cut shipments starting next month in retaliation for Western-led sanctions, and there have been some signs of falling flows lately. A smaller-than-usual Russian contingent is expected in Mayfair this year.
“People travel from all over the world to attend,” said Keshav Lohiya, founder of Oilytics Ltd. to London. “I think the issue will be long-term structural issues. Yes, the markets are weak right now, but they are commodities that can live without Russia in the long term.”
