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Top oil traders see Brent crude averaging $50-$60/b next year

London — Global oil prices will likely hold close to current levels well into next year, with Brent averaging in the $50-60/b range, unless the US-China trade tensions are resolved and fears over a new global recession subside, CEOs of top independent oil traders said Wednesday.

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A recent string of data showing manufacturing activity contracting in China, Germany and the US, in addition to a lack of progress on US-Chinese trade talks, has been hitting oil demand growth estimates and weighing on oil prices.

"We are bearish in the short term," the head of Trafigura, Jeremy Weir told the Oil & Money conference in London.

"The sentiment is not good with the current trade environment and the strong US dollar. I would say there is further downside in the short term, with recovery possible towards the second half of next year."

Using a trading term to refer to the whole number part of a price quote, Weir said, "probably a five-handle and maybe slightly lower from where we are now," when asked where Brent oil prices could stand a year from now.

Weir's comments were echoed by the CEO of Vitol, the world's biggest independent oil trader.

"Without some resolutions to the trade wars then we remain a little bit bearish, a five handle for us," Russell Hardy told the event, responding to the same question on his outlook for Brent.

"The risk premium vanished pretty rapidly," Hardy said referring to the short-lived price spike in the wake of the Saudi oil plant attacks last month.

"It's a tussle that's going on between geopolitics and the concern over GDP growth in the future and oil demand growth, and US shale. Those three elements are pulling against each other all the time. At the moment, concerns over the future are winning."

Brent crude stood at around $59/b in midday European trading Wednesday after falling about 6% last week when it slipped to a two-month low near $56/b in intra-day trading.

Global oil demand may already be at its weakest since the 2008 financial crisis, according to Standard Chartered estimates, after demand shrank year on year for the third consecutive month in July, the first time that has happened in a decade.

The head of Switzerland-based trader Gunvor Torbjorn Tornqvist also said he expected oil prices to remain anchored close to current levels next year given market fundamentals. That will mean further pressure on OPEC and its key producer allies to expand their current output deal if they hope to support crude values.

"I think the market would like to test the market's resolve during the next year," Tornqvist told the event. "I believe it is not enough just to maintain the production. There is too much slippage (on production quotas) inside and so much non-OPEC production coming so they need to do something."

S&P Global Platts Analytics expects Brent to end the year at $65-$70/b, as crude stock draws in November and December offset the current bearish market sentiment.

Crude demand was expected to jump almost 5 million b/d in November and December after higher than normal seasonal refinery shutdowns in October resulting in large stocks draws and steepening backwardation at the end of the year, according to Platts Analytics.

-- Robert Perkins, robert.perkins@spglobal.com

-- Edited by Dan Lalor, daniel.lalor@spglobal.com