The International Energy Agency (IEA) stated on Tuesday that the global oil market will face a significant "supply surplus" situation in the new year, specifically in 2025, and assured that the agency is ready to take action in response to potential disruptions in Iranian oil supplies. The latest report from the IEA implies that one of the authoritative institutions in the energy sector has publicly responded to the "supply surplus" viewpoint put forth by Wall Street giants such as Goldman Sachs and Morgan Stanley—predicting that starting in 2025, the oil market will experience a sustained situation where supply exceeds demand. Following the release of the IEA's latest report, the already weak Brent crude futures prices plummeted nearly 5%.
On Monday, the Organization of the Petroleum Exporting Countries (OPEC) unexpectedly lowered its global oil demand growth forecasts for this year and next for the third consecutive month. With OPEC's three consecutive reductions in the overall oil demand expectations, including crude oil and various refined petroleum products derived from it, OPEC seems inclined to abandon the organization's long-standing extremely optimistic forecasts for oil demand.
In its latest monthly report, OPEC stated that global oil consumption will increase by 1.9 million barrels per day in 2024, a growth rate of only about 2%, which is 106,000 barrels per day less than the organization's previous forecast. It is estimated that consumption in 2025 will only increase by 1.6 million barrels per day. The IEA's forecast is even more pessimistic, predicting that global oil demand will increase by 860,000 barrels per day this year, 40,000 barrels per day less than the previous forecast.
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The OPEC report also revealed that the significant efforts to support oil prices by the OPEC+, which includes OPEC and its allies, have been disrupted by countries that failed to meet their production cuts—such as Iraq, Kazakhstan, and Russia. Particularly, Russia, in its eagerness to secure substantial revenue for the ongoing conflict with Ukraine, has been flooding the market with cheap Russian oil.
Similarly, in recent times, the world's two largest commodity trading giants—Trafigura Group and Gunvor Group—have painted a gloomy picture of the crude oil trading market, reflecting the serious concerns of commodity trading giants over the sluggish demand for crude oil in Asia and the continuous growth in supply, which could lead to a future trend of oversupply. The long-term bullish commodity giant Trafigura Group has rarely agreed with the "supply surplus" viewpoint and expects Brent crude oil prices to soon enter the pessimistic range of $60.
These large institutions, representing the most authoritative views of the oil market, have abandoned their strong bullish forecasts for oil demand that they have firmly held since the beginning of the year. They have finally realized that the scale of global fuel usage is slowing down dramatically and are inclined to accept the pessimistic expectation of a "supply surplus" in the oil market, which has been led by Wall Street recently.
In recent weeks, Brent crude prices have risen slightly, mainly due to investors' concerns that Israel might retaliate against Iran's missile attacks by striking its oil facilities, with Iran being a major oil exporter and an OPEC member. However, since then, the negative concern of a "supply surplus" has continued to ferment, and OPEC's latest report on Monday has further reinforced traders' expectations of an imminent oversupply in the oil market, leading to a continued weak trend in Brent crude prices.
On Tuesday, the IEA's latest report further struck Brent crude futures prices, which fell nearly 5% on Tuesday following a significant 2% drop on Monday. The price of Brent oil has now returned to around $73 per barrel.
Before OPEC released its latest monthly report, the latest data from the U.S. Energy Information Administration (EIA) showed that U.S. crude oil inventories unexpectedly increased by 5.8 million barrels for the week ending October 4th, exceeding the expected 2 million barrels, indicating that supply remains ample and market demand has not significantly warmed up, catalyzing the extremely negative expectation of a "supply surplus."
The IEA's latest report also dispelled market expectations that a reduction in Iranian oil supplies would drive up oil prices. The International Energy Agency, which manages the emergency oil stocks of industrialized countries, stated in its latest report that global public oil stocks have exceeded 1.2 billion barrels, with the remaining production capacity of the "OPEC+" group, which includes OPEC and allies such as Russia, remaining at a historical high.The International Energy Agency (IEA) stated in its monthly report released on Tuesday: "As the supply situation evolves, the IEA is ready to take action at the necessary time."
"Currently, international oil supply continues to flow, and without significant supply disruptions, the market will face a considerable supply surplus in the new year." Furthermore, the IEA further lowered its forecast for global oil demand growth this year in its latest report, primarily due to potential weak demand from major oil-consuming countries such as China, Japan, and South Korea.
The IEA, headquartered in Paris, estimates that demand in the Chinese market may only grow by 150,000 barrels per day in 2024. IEA statistical data shows that China's oil consumption in August decreased significantly by 500,000 barrels per day compared to the same period last year, marking a continuous four-month downward trend.
The IEA said in the report: "The continued underperformance of oil demand from major consumers such as China is the main drag on overall expected demand growth."
Amidst slowing demand, non-OPEC countries are significantly increasing oil supply. The IEA forecasts that oil production from non-OPEC countries will grow substantially by 1.5 million barrels per day this year and next, with the United States, Guyana, Canada, and Brazil's production growth outpacing the corresponding demand growth rate.
The expectation of the oil market's complete shift to a "supply surplus" is the core logic for most investment institutions to be bearish on Brent crude oil prices for the rest of this year and 2025. Ben Luckock, the head of oil trading at Trafigura Group, recently stated that Brent crude oil prices could soon enter the pessimistic range of $60.
Recent research reports from Wall Street giants Morgan Stanley and Goldman Sachs both show that it is expected that by the end of 2024 or the beginning of 2025 at the earliest, the entire oil market may shift from a slightly tight supply-demand balance to a potential surplus. Goldman Sachs even predicts that Brent crude oil trading prices may fall to a low point of $61 per barrel for this phase.
Exane BNP Paribas, the securities division of BNP Paribas, downgraded ExxonMobil's stock rating from "neutral" to "underweight," setting the target price at $105 (compared to the company's stock closing at $124.08 on Monday in the US stock market). The stock of this long-term leader in the US oil and gas industry is rarely given the most negative ratings of "underweight" or "sell," and this is the first time in more than a year that the stock has been given an "underweight" rating by an investment institution. Exane BNP Paribas' core logic for being bearish on ExxonMobil's stock price is that "OPEC+" production capacity is about to face a severe surplus, indicating that this negative outlook is "hanging over the entire oil industry like the Sword of Damocles," and also indicating that this traditional energy company faces the risk of extremely weak refining profit prospects.