Commodity giant Trafigura is also pessimistic: oil prices may drop to as low as $60!

One of the world's top oil traders painted a bleak picture of the oil trading market on Monday and described OPEC+ as facing a dilemma in coordinating the alliance's goals with market demand, thus sending out "confusing messages."

Ben Luckock, global head of oil at commodity giant Trafigura, stated at the Asia Pacific Petroleum Conference (APPEC) hosted by S&P Global Commodity Insights that OPEC+ led by Saudi Arabia and Russia postponed production increase plans last week, but given the "not very optimistic" balance outlook, a direction for next year's actions needs to be chosen.

OPEC and its allies have been limiting supply to support prices, but the alliance's market share has been taken by competitors including U.S. shale oil producers, and the idle production capacity of its member countries has not been released. Meanwhile, despite OPEC+ extending the supply restrictions, oil prices are still under pressure due to concerns about slowing global oil consumption, with Brent crude potentially falling below $70 per barrel.

Executives from Trafigura and another trading company, Gunvor, both indicated that due to weak demand and persistent oversupply, oil prices are expected to fluctuate between $60-70 per barrel. This stance is not common for Trafigura, which is bullish on long-term commodity trends.

Luckock said, what the market wants to see is that if oil prices rise, OPEC+ will not resume production, or will do so at a slower pace. He added that OPEC+ needs to give confidence to the market as this supply is not currently needed.

The International Energy Agency (IEA) stated in August that if OPEC sticks to its production increase plans, the current balanced state of the global oil market will turn into oversupply in the fourth quarter. The Paris-based agency will update this outlook later this week.

Goldman Sachs analyst Daan Struyven stated at the conference that while a potential price war between OPEC+ and U.S. shale oil producers is unlikely, the so-called floor price for oil may be shifting from around $75-80 to $70. This is the estimated long-term breakeven price for shale oil.

Brent crude prices rose and then fell on Monday, dropping below $71 per barrel at one point, hitting the lowest level since mid-March last year, with a 0.5% intraday decline.

Analysts noted that part of the earlier rebound on Monday was due to the possibility of a hurricane near the U.S. Gulf Coast.

The U.S. National Hurricane Center stated last Sunday that a tropical storm in the southwest Gulf of Mexico is expected to become a hurricane before reaching the northwest coast of Mexico. Refining capacity along the U.S. Gulf Coast accounts for about 60% of U.S. refining capacity.

PVM analyst John Evans said, "Affected by the hurricane warning that may threaten the Gulf of Mexico coast, oil prices rose slightly in the morning, but the more widespread focus is still on demand outlook and OPEC's movements.

Morgan Stanley lowered its Brent crude price forecast for the fourth quarter from $80 per barrel to $75 per barrel last week, adding that prices may remain around that level unless demand weakens further