India's Russian crude buying, oil on water driving market sentiment: Vitol CEO

Geopolitical tensions and growing pressure on buyers of Russian and Iranian oil are tightening the oil market and overriding expectations of more comfortable supply-demand fundamentals this year, Vitol CEO Russel Hardy said Feb. 12.

Speaking at an energy conference in London, Hardy said unpredictable geopolitics remain "the most watched subject" for the trading house, after oil prices having been in the $60-$70/b range for the past year.

"Everyone felt comfortably that the supply side was outstripping demand and we would have a soft year," Hardy said. However, the the geopolitics "kept mounting up," with supply from Russia, Venezuela and Iran all affecting balances and sentiment, he added.

Platts, part of S&P Global Energy, assessed Dated Brent at $73.12/b on Feb. 11, having gained 21% since mid-December, largely on tensions in the Middle East.

Russian crude supply has been "pretty solid, pretty resilient" despite significant sanctions implemented following its invasion of Ukraine, but "cracks are beginning to appear," Hardy said, particularly with India agreeing to cut imports.

Earlier this month, US president Donald Trump said he had agreed a trade deal with Narendra Modi's government that would slash trade barriers and see India stop buying Russian crude.

Another factor driving sentiment and prices this year is the growing volumes of oil on water, Hardy said, adding that 40 million barrels of Russian crude have been added to its shipping fleet over the last 60 days.

"That's roughly 1 million b/d that is not reaching a refinery, it is just sitting on the high seas," he said.

Russia's 6-7 million b/d of crude supply has "kept the market in balance" in recent years, he said.

"There are less and less places for Russian oil to go," Hardy said, adding that China is now the only real "home" for Russian and Iranian barrels.

"The traditional buyers of those two markets are reaching for more Western and Saudi Arabian supply sources, which is tightening the real market," Hardy added.

Long-term outlook

Looking further ahead, Hardy said Vitol's long-term oil demand projections had been altered by the "American government's move towards traditional hydrocarbons and away from electrification."

In a report Feb. 9, Vitol pushed back its peak oil demand forecast from the early to mid-2030s due to slower electric vehicle adoption, with demand now expected to reach 112 million b/d at its peak around 2035.

Demand in 2040 is expected to be 5 million b/d higher than it is currently, the report said. Its previous forecast, in February 2025, said demand would start to decline from the early 2030s and reach 2024 levels in 2040.

Oil analysts S&P Global Energy CERA predict total oil liquids demand will be about 106 million b/d in 2040.

Hardy told the conference that Vitol sees transportation fuels as "the drivers that will shift oil demand," particularly with the US consuming around 9 million b/d of gasoline. With EV sales stalling in the US, that "pushes the demand peak out a bit further," he added.

Plastics demand is still growing, even if the chemicals market is currently oversupplied, while aviation remains a growth area, he said. With sustainable aviation fuel unable to keep pace with demand growth, jet fuel consumption will continue to grow.

Beyond oil and products, Hardy said rising data center construction to meet an expected AI revolution "will end up being a gas story" in the US, meaning it is unlikely to transform grids in the UK or Europe.

"We'll have demand here, but not 5-10 GW," he said, predicting "smaller data center requirements here in comparison to Google or companies of that scale that will seek large amounts of power in the US to train their models".

"Some of the LLM model learning will probably take place in the US and we will be given the final product here," he added.

He also said that the LNG market had come to resemble the crude market, having doubled in size over the past two decades, with cargoes able to move around the world in response to demand spikes and weather conditions.