Global oil supply growth is outstripping demand, the CEO of one of the world’s largest oil traders, Gunvor, said.

Oil prices hit a three-year low last week due to slow demand growth in China and concerns about the impact on global economic growth of U.S. President Donald Trump’s protectionist trade policies.

“We still see demand growth in the world, but it’s not that big,” Gunvor CEO Torbjorn Tornqvist said in an interview with Reuters on the sidelines of an energy industry conference in Houston.

“That’s the problem.”

Demand for gasoline and diesel has reached a plateau in China, the world’s second largest consumer, Tornqvist said. The rapid rollout of electric vehicles in China has eaten into gasoline demand, while a growing number of trucks running on natural gas has hit diesel demand.

The balance of supply and demand was loosening, he said. The Organization of the Petroleum Exporting Countries decided to make small monthly increases in output from April onwards as it seeks to roll back millions of barrels per day of oil production cuts.

That increment was so small it was a “rounding error,” Tornqvist said. However, the spare capacity that the group has offline continues to weigh on the market, he added.

“I think the fact that you do have that capacity will always be a damper on prices,” Tornqvist said.

Global benchmark Brent crude was trading under $70 a barrel on Monday, after hitting its lowest level since December 2021 last week at $68.33.

If crude prices fall another $5 to $6, it is unlikely that U.S. shale oil producers would further grow output, Gunvor’s CEO added.

Uncertainty over tariffs and sanctions and their impact on the economy and the energy industry were contributing to volatility, he said.

“You create artificial arbitrage. And I don’t think that’s good in the long run,” he said, when asked about tariff policy during a conference panel.

With regards to tariffs on Canadian oil, which have been paused for a month, Tornqvist suggested about two-thirds of the added costs would be paid by U.S. refiners and consumers, and the rest by producers.

However, he does not anticipate tariffs to change oil flows given Canada has few other export alternatives.

Tornqvist said he was unsure how quickly sanctions on Russian oil could be lifted if Russia and Ukraine come to a peace deal over the war.

Europe would likely go back to buying Russian oil and gas if sanctions were lifted, he said, but it was unlikely that all damaged or shutdown gas pipelines would come back online.

Fuel demand in Southeast Asia is a bright spot, and continues to grow, he said.

Source: Reuters reported by Arathy Somasekhar in Houston and edited by Simon Webb, Marguerita Choy and Nia Williams