Oil traders see prices falling as geopolitical 'risk premium' dissipates

Oil traders Gunvor, Trafigura and Vitol expect oil prices to fall through this year and into next, before edging up again, with the market's geopolitical risk premium starting to fall, senior executives from the trio said Oct. 14.

Addressing the Energy Intelligence Forum in London, Ben Luckock, Trafigura's head of oil, predicted Brent would fall into the $50s/b over the Christmas and New Year period, before being driven back into the mid-60s in the second half of next year by standard low-price dynamics.

Vitol CEO Russel Hardy and Gunvor boss Torbjorn Tornqvist, on stage alongside Luckock, said they expected oil prices to be in the $62-64 range by this time next year.

The traders noted that widespread expectations of an oversupplied market had not come to pass so far in 2025, with the continued backwardation of the oil market suggesting strong prompt demand.

Platts, part of S&P Global Energy, last assessed Dated Brent at $64.23/b on Oct. 13, having fallen from over $80/b in January.

Key reasons for the market's "resilience", Tornqvist said, were the geopolitical "fear factor" from conflict in the Middle East and Europe, as well as low stock levels in developed countries.

China is the outlier there, Luckock said, having built up its Strategic Petroleum Reserve in 2025, which has helped the market. The true volume of Chinese buying for oil stocks is unknown, he said, offering 100 million barrels as a potential figure.

With stocks still low in "Western market centers", Hardy said, the excess has ended up predominantly in China or as oil on water from Iran and Venezuela that is yet to find buyers.

And while product demand and prices have been strong this year, supporting refining margins, gasoline and diesel demand in the world's largest crude importer have "pretty much plateaued", Tornqvist said, due primarily to electrification.

While petchems demand is growing, that does not necessarily require oil, but rather ethane and other light condensates.

"I don't think you're going to have a huge growth coming from China, I think it will have to come from somewhere else," said Luckock. "I wouldn't say I'm bullish on Chinese oil demand."

Supply side events

Despite stubbornly low inventories, the traders said prices were now set to soften.

"More supply has hit the market in the second half of the year," said Hardy. "OPEC has steadily increased, and the non-OPEC contribution has also increased in places like Guyana and a little bit in Norway and Brazil," he added.

The OPEC+ alliance has announced a string of production hikes since April.

"I have a feeling that things are changing to the softer side," said Tornqvist. "Prices are slowly coming down."

Luckock agreed. "For 12 months we've all known that this surplus is coming. It's just about here now," he said. "This year we have drifted down broadly speaking $10...The reality is it probably goes lower from here."

Hardy said the market had carried a geopolitical risk premium throughout the year, but that it was now "dissipating", because the market is "better able to deal with shocks".

A US-backed peace deal between Israel and Hamas in recent days has led to the return of Israeli hostages and the release of Palestinian prisoners, as well as a pause in the fighting in Gaza.

However, Hardy stressed that the Russia-Ukraine war – which roiled energy markets and sparked a European shift away from Russian hydrocarbons – isn't over, with ongoing attacks on energy infrastructure on both sides, and potential for new flashpoints across the world.

An estimated 20% of Russian refining capacity has been impacted by an ongoing Ukrainian drone campaign, Luckock noted.

"The market is probably over-discounting the chance of supply side events next year – whether Iran, Venezuela or Russia," Hardy said. "These are big oil producers in situations where today's environment is not stable."

Luckock echoed the comments, noting that the risk premium "is as low as it sensibly should be at the moment."