Crude Oil: Oversupply Hits New Highs Since COVID-19

■ Changes to the global crude oil demand outlook are mixed, but the supply outlook has been adjusted higher. 

■ OPEC+ has room to boost crude oil supply and incentives to prevent WTI from rising too much. 

   Major international organizations released their global crude oil supply and demand forecasts in September. 

   Regarding global crude oil demand growth in 2025, the U.S. Energy Information Administration (EIA) projected weaker growth, cutting its previous forecast from 980,000 barrels per day to 900,000 barrels per day (2024: 102.91 million barrels → 2025: 103.81 million barrels). The Organization of the Petroleum Exporting Countries (OPEC) maintained its previous forecast, expecting an increase of 1.3 million barrels per day (2024: 103.84 million barrels → 2025: 105.14 million barrels). The International Energy Agency (IEA) slightly raised its forecast from 680,000 barrels per day to 740,000 barrels per day (2024: 103.0 million barrels → 2025: 103.74 million barrels). 

   In September, some OPEC+ members agreed to increase production by 137,000 barrels per day (bpd) starting in October to regain market share and keep prices stable, significantly affecting the supply outlook. The EIA raised its forecast for global crude oil supply growth in 2025 from 2.28 million bpd to 2.35 million bpd (2024: 103.19 million bpd → 2025: 105.54 million bpd). The IEA also increased its forecast from 2.5 million bpd to 2.7 million bpd (2024: 103.1 million bpd → 2025: 105.8 million bpd). As a result, the projected supply surplus by 2026 is expected to reach its highest level since the COVID-19 pandemic of 2020. 

   OPEC+ had previously implemented three production cuts but decided to end its voluntary 2.2 million bpd cut in September. It will also bring forward the voluntary 1.66 million bpd cut, originally scheduled to end at the end of 2026, to October as part of a phased reduction. While the 2 million bpd coordinated production cut, which will continue until the end of 2026, involves more countries and is unlikely to end quickly, the Dallas Federal Reserve's September quarterly survey of about 200 US oil and gas companies showed that US shale oil producers generally believe they cannot stay profitable if WTI futures prices fall below $60 per barrel. Therefore, OPEC+ has an incentive to limit upward pressure on WTI. Even if geopolitical risks in Russia or the Middle East increase, WTI will find it difficult to sustain a prolonged upward trend.