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This quarter should be the tightest of the year for global crude supplies, but once the summer squeeze has passed, fundamentals look set to soften.
Oil traders betting on a price rally are confronting a make-or-break moment.
This quarter should be the tightest of the year for global crude supplies, as American driving demand hits its summer peak and hurricanes menace the country’s production.
World inventories stand to deplete at a brisk clip of about 800,000 barrels a day between June and September, the International Energy Agency estimates.
For prominent oil-watchers such as JPMorgan Chase & Co., BNP Paribas SA and UBS AG, that deficit should bolster Brent crude futures to $90 a barrel — from about $84 currently — before the quarter is done.
A rapid drawdown in US stockpiles, which have plunged by more than 15 million barrels in the past two weeks, indicates that the crunch is indeed underway.
But once the summer squeeze has passed, fundamentals look set to soften and may remain subdued for a considerable time.
Source: Bloomberg calculations using IEA data
Global inventories will begin to stabilize in the fourth quarter on cooling demand growth in China, the IEA projects. The nation’s economic expansion unexpectedly slowed to the weakest pace in five quarters, refiners returned tardily from maintenance work, and imports faltered.
Oil markets will flip into a considerable surplus in early 2025, according to the IEA, and remain oversupplied all year amid plentiful new output from the US, Canada, Guyana and Brazil.
The glut should persist even if the OPEC+ alliance shelves plans to revive halted production.
Led by Saudi Arabia, the cartel has withheld substantial oil volumes for the past two years, and last month it outlined a provisional road map for restoring output starting in the fourth quarter.
When crude prices swooned in response, coalition members quickly stressed that the supply hike could be postponed. It’s no surprise that many analysts expect the producers, who will hold a monitoring meeting Aug. 1, to exercise caution.
“Why would OPEC continue to push through volumes?” BNP commodities strategist Aldo Spanjer said. “It would destroy the market.”
—Grant Smith, Bloomberg News
Source: BloombergNEF
Note: Indexed values, 2023 = 100.
Changes in the dynamics of the battery industry have led to revised metals demand outlooks. A near-term slowdown of electric vehicle sales, an oversupplied market and a slump in battery metal prices are headwinds facing the industry. While current market conditions don’t favor a quick rebound, forecast demand growth remains a bright spot. BloombergNEF now sees a doubling of nickel demand by 2035, while total lithium needs will more than triple during the same period.
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