Crude Oil: Expected to See Larger Supply Surplus

■ While projections for global crude oil demand have been adjusted with some variation, supply forecasts have been increased further. 

■ The supply glut is forecasted to reach its largest size ever, making it difficult for WTI crude oil to gain significant upward momentum. 

   In October, various international agencies released their latest global crude oil supply and demand projections. Regarding the growth in global daily crude oil demand in 2025, the U.S. Energy Information Administration (EIA) believes the slowdown in demand is less severe than previously thought, leading to an upward revision of its 2025 demand growth forecast to 1.08 million barrels (2024: 102.91 million barrels → 2025: 103.99 million barrels), which is higher than last month's increase of 900,000 barrels. The Organization of the Petroleum Exporting Countries (OPEC) maintained its prior forecast, expecting an increase of 1.3 million barrels (2024: 103.84 million barrels → 2025: 105.14 million barrels). However, the International Energy Agency (IEA) slightly lowered its forecast, projecting an increase of 700,000 barrels (2024: 103.1 million barrels → 2025: 103.8 million barrels), a modest decrease from the previous month's rise of 740,000 barrels. 

   To regain its share of crude oil supply and uphold its market pricing dominance, OPEC+*¹ members decided on October 5 to boost output by 137,000 barrels daily starting in November. Despite disagreements between Saudi Arabia, which called for a significant increase, and Russia, which preferred a smaller hike to prevent downward pressure on prices, the two sides ultimately agreed to maintain the same production increase as the previous month. As a result, the global daily crude oil supply forecast for 2025 has been revised upward. The EIA raised its forecast for production increase to 2.68 million barrels (2024: 103.19 million barrels → 2025: 105.87 million barrels), surpassing the last month’s estimate of 2.35 million barrels. The IEA also increased its forecast to 3 million barrels (2024: 103.1 million barrels → 2025: 106.1 million barrels), up from 2.7 million barrels last month. According to the IEA’s forecast, the supply surplus will grow from 2.3 million barrels in 2025 to 4 million barrels in 2026, reaching a record high. 

   In response to Russia's invasion of Ukraine, the U.S. Treasury Department added two major Russian oil companies to its sanctions list, and the European Union (EU) agreed to impose additional sanctions on Russia. Although initial market expectations were for reduced Russian oil exports and tighter global crude supply, a September quarterly survey of about 200 U.S. oil and gas firms by the Dallas Federal Reserve Bank indicated that U.S. shale oil companies could remain profitable with WTI crude prices above $60 per barrel. Consequently, OPEC+ has an incentive to prevent WTI prices from rising too much, as higher WTI prices would enable U.S. capacity expansion. WTI crude oil prices are likely to stay under upward pressure.