(Bloomberg) -- The mood at Houston’s big annual oil and gas get-together has been upbeat on the prospects for the industry under a fossil fuel-friendly Trump administration. But there’s a significant catch: some of the biggest oil traders are getting more bearish on the outlook for crude prices.
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While they don’t see the prospect of a crash, top traders including Vitol and Gunvor said prices could grind lower as supply starts to outstrip demand. The OPEC+ group of producers has begun releasing additional barrels into the market, the US will continue to add production — albeit more slowly than in recent years — and South America is also growing.
“The industry is over-drilling now, that is clear,” Gunvor Group Chairman Torbjörn Törnqvist said in an interview at CERAWeek by S&P Global in Houston. “We are drilling more inside and outside OPEC than demand growth warrants.”
The prospect of Russian sanctions being eased is another factor adding to the bearish mood. Already, crude flows from Russian ports in the four weeks to March 9 jumped by about 300,000 barrels a day — the biggest gain since January 2023.
On the demand side, while global consumption has been growing steadily, many in Houston expressed the view, both publicly and privately, that President Donald Trump’s tariff policies threaten to slow the US economy.
Vitol Group Chief Executive Officer Russell Hardy estimated prices could now trade in a new range of about $60-$80 a barrel, settling in a slightly lower range than the past few years. Gunvor said there is a possibility that WTI, the benchmark US price could go below $60 a barrel, at least for a short time.
Benchmark Brent futures have dropped more than 12% from the peak this year to just over $70 a barrel, close to the lowest since 2021. WTI is down roughly 15% from its high to $67 a barrel.
Still, there are reasons why any slide could be limited. The Trump administration has threatened measures to crack down on the supply of sanctioned Iranian oil into the market and Venezuelan supply is also under pressure.
Another form of support comes from expectations that US oil production growth - particularly shale - could also slow down if prices slide towards $60 a barrel.
At the end of last year, Trafigura expected US production to grow by about 400,000 barrels a day, of which about 100,000 was shale. If current price declines are sustained, there could be a scenario where US shale output remains flat or even declines, said Saad Rahim, chief economist at Trafigura.