Oil has hit its lows says Vitol chief

Ian Taylor, chief executive of the world's largest independent oil trader Vitol, said oil prices have hit their lows.

"Yes we have seen a bottom," said Mr Taylor, speaking ahead of his appearance at the FT Commodities Global Summit in Lausanne, Switzerland. "Especially if the barrels from Iran have been delayed until later this year."

Mr Taylor said he expected oil consumption to grow by 1m barrels a day this year. There are "some signs of a pick-up in demand. it's not clear yet if it is driven by lower prices or by GDP", he said, citing a pick-up from the US and Europe.

On the supply side, US production, that increased at a relentless pace amid higher oil prices, should start to slow in the second half of this year, he added.

Even so Mr Taylor said he was "surprised" by the current trading environment.

The 50 per cent drop in prices since June has allowed oil traders from Vitol to Trafigura and Glencore to buy oil cheaply for storage.

Traders lock in a profit through the simultaneous sale of futures contracts with different prices and delivery dates. But the window for the most profitable trading play, oil storage at sea, has closed of late.

"The major moves we saw at the start of the year have been mitigated." The trading climate, he said, "is a bit flat".

"We'd all love a super contango", but comparisons to the profitability seen in 2008-09 after the financial crisis when prices dropped are "way overblown".

The remarks contrast with upbeat comments from rival Trafigura, whose chief executive said on Monday "the dramatic move in oil prices has been an opportunity for growth" and it had seen strong returns from oil trading.

If a nuclear deal between Iran and the world powers is reached in June, Mr Taylor said, it would mean increased volumes into the market in "the last quarter of this year at the earliest" although the "beginning of next year" is more likely.

On the prospect of trading with Iran, Mr Taylor said they continue to talk with Iran, "but there is nothing we can do right now" until the lifting of international sanctions.

Although the lower oil price environment has spurred chatter about opportunistic mergers and acquisitions, Mr Taylor, said there are no assets that are "poorly priced".

"There is so much money in the hands of people willing to invest in the energy space" such as private equity groups. "We're not seeing any golden nuggets," he added.

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