The “oil talkers” collectively turned pessimistic! IEA says there will be an “oversupply” of oil in 2025

The Zhitong Finance App learned that the International Energy Agency (IEA) said on Tuesday that the global oil market will experience a fairly large-scale “oversupply” situation in the new year, that is, 2025, and guarantees that the agency is ready to take action at any time to deal with disruptions in Iran's oil supply. The IEA's latest report means that one of the leading agencies in the energy sector has publicly responded to the “oversupply” view of oil put forward by Goldman Sachs and Morgan Stanley and other Wall Street banks — that is, it is expected that starting in 2025, supply will continue to exceed demand in the oil market. After the IEA's latest report came out, the price of Brent crude oil futures, which had been weak recently, plummeted by nearly 5% after hearing the news.

Earlier on Monday, the Organization of Petroleum Exporting Countries (OPEC) lowered its global oil demand growth forecast for this year and next for three consecutive months, which came as a surprise to crude oil market analysts. As OPEC lowered its overall oil demand forecast for three times in a row, including crude oil and various refined oil products obtained after crude oil processing, OPEC seems inclined to abandon the agency's long-standing extremely optimistic forecast of oil demand.

OPEC said in its latest monthly report that global oil consumption will increase by 1.9 million b/d in 2024, an increase of only about 2%, which is 106,000 b/d less than the organization's previous forecast. Consumption is expected to increase by only 1.6 million b/d in 2025. The IEA forecast is even more pessimistic. The agency predicts that global oil demand will increase by 860,000 b/d this year, down 40,000 b/d from the previous forecast.

The OPEC report also shows that major production reduction efforts, which include OPEC and its allies to support oil prices, have been disrupted by countries that have failed to cut production — such as Iraq, Kazakhstan, and Russia. In particular, Russia continues to pour cheap Russian oil into the market due to its eagerness to obtain large amounts of revenue to invest in the Russian-Ukrainian conflict.

Also recently, two of the world's largest commodity trading giants, Tock Group and Gongwo Group, painted a bleak picture of the prospects of the crude oil trading market, reflecting the serious concerns of commodity trading giants about sluggish demand for crude oil in Asia and future oversupply trends as supply continues to grow. Commodity giant Toke Group, which has long been bullish on crude oil, rarely shares the “oversupply” view, and it is expected that the price of Brent crude oil may soon enter the pessimistic range of $60.

These large institutions, which represent the most authoritative views on the oil market, have all abandoned the strong bullish oil demand forecasts they have held since this year, finally realized that the scale of global fuel use is slowing down sharply, and tend to accept the pessimistic expectations of “oversupply” of petroleum recently dominated by Wall Street.

The price of Brent crude oil has risen slightly in recent weeks, mainly because investors are concerned that Israel may retaliate against Iran's missile attacks by attacking its oil facilities, and Iran is a major oil exporter and OPEC member. However, since then, as negative concerns about “oversupply” continued to ferment, OPEC's latest report on Monday strengthened traders' expectations of impending oversupply in the oil market. Brent crude oil prices have continued to weaken recently.

On Tuesday, the IEA's latest report further hit the Brent crude oil futures price. Following a sharp drop of 2% on Monday, it directly plummeted by nearly 5% after the IEA report was released on Tuesday. The price of oil has now fallen back to around $73 per barrel.

Prior to OPEC's release of the latest monthly report, the latest data from the US Energy Information Administration (EIA) showed that US crude oil inventories unexpectedly increased by 5.8 million barrels in the week up to October 4, exceeding expectations of 2 million barrels, suggesting that supply is still sufficient, and market demand has not significantly heated up, fueling extremely negative expectations of “oversupply.”

The IEA's latest report also dispelled the market's expectations that the reduction in Iran's oil supply would stimulate a rise in oil prices. The International Energy Agency (IEA), which manages emergency oil stocks in industrialized countries, said in its latest report that global public oil stocks have exceeded 1.2 billion barrels, and the remaining production capacity of “OPEC+” formed by allies such as OPEC and Russia continues to be at the highest level in history.

The International Energy Agency said in its monthly report released on Tuesday: “As the supply situation evolves, the International Energy Agency stands ready to act within the necessary time period.”

“Currently, international oil supply continues to flow. Without major supply disruptions, the market will face a sizable supply-side surplus in the new year.” Furthermore, in its latest report, the International Energy Agency further lowered the agency's forecast for the growth rate of global oil demand this year. The core reason is that demand from major oil consuming countries such as China, Japan, and South Korea may weaken.

The Paris-based International Energy Agency predicts that demand in the Chinese market may increase by only 150,000 b/d in 2024. International Energy Agency statistics show that China's oil consumption in August fell sharply by 500,000 b/d compared to the same period last year. This is the fourth consecutive month of decline.

The International Energy Agency stated in the report: “China's oil demand, which consumes oil, continues to fall short of expectations, which is a major drag on the expected growth rate of overall demand.”

While demand is slowing, non-OPEC countries are drastically increasing oil supply. The IEA predicts that oil production in non-OPEC countries will increase sharply by 1.5 million b/d this year and next, with production in the US, Guyana, Canada and Brazil being higher than the corresponding growth rate of demand.

The expectation that the oil market will completely shift to “oversupply” is the core logic of most investment institutions bearish the price trend of Brent crude oil for the rest of the year and 2025. Ben Lecock, head of oil trade from the Tork Group, recently said that the price of Brent crude oil may soon enter the pessimistic range of 60 US dollars.

Research reports recently released by Wall Street firm Morgan Stanley and Goldman Sachs all show that it is expected that as early as the end of 2024 or the beginning of 2025, the entire oil market may shift from a slightly tight balance of supply and demand to potential surpluses. Goldman Sachs even predicts that the trading price of Brent crude oil may fall to a phased low of 61 US dollars per barrel.

Exane BNP Paribas, the securities division of BNP Paribas, downgraded ExxonMobil's stock rating from “neutral” to “reduced holdings,” and the target price was set at $105 (compared to the company's stock price closing at $124.08 on Monday). This is also the first time in more than a year that the stock has been rated “reduced” or “sold” by an investment institution. The core logic behind Exane BNP Paribas's bearish on ExxonMobil's stock price is that “OPEC+” is about to face serious overcapacity, indicating that this negative outlook “hangs over the entire petroleum industry like the sword of Damocles,” and that the traditional energy company faces the risk of extremely weak refining profit prospects.