Futures on Brent crude oil (BZ=F) and West Texas Intermediate crude (CL=F) briefly fell below $62 and $58, respectively, before making a slight recovery on Tuesday after a bearish report on an upcoming supply glut.
Prices fell largely in reaction to a report released Tuesay by the International Energy Agency, which said the global oil surplus next year could climb to an unprecedented 4 million barrels per day, raising the agency’s expectations from their previous 3.3 million barrels per day prediction.
Such a surplus would be equivalent to nearly 4% of the world’s entire demand, according to Reuters.
The coming glut has largely been driven by a combination of growing oversupply and falling demand. The OPEC+ cartel, led largely by Saudi Arabia, agreed in early October to raise production levels again by 137,000 barrels per day as the kingdom looks to reclaim market share.
The US’s own crude inventories for the week ended Oct. 10 will likely rise to 5.2 million barrels per day from the previous week’s 3.7 million build as demand is projected to slip, according to analysts at Macquarie Bank. The US Energy Information Administration publishes prior week numbers at 10:30 a.m. ET each Wednesday.
The volume of oil onboard sea-bound tankers has climbed to more than 1 billion barrels, according to Vortex data cited by Bloomberg — the highest level seen since 2020, when the pandemic left barrels largely stranded at sea.
Build-up through the first three quarters of the year had largely been absorbed by China, which has been importing massive stockpiles of crude that far outpace the nation’s domestic demand. But given the rising level of barrels at sea, analysts have said China’s absorption will only do so much.
In a note last week, Macquarie analysts said in a note that “crude price is not yet reflecting the large, broadly anticipated surpluses” and that futures contracts remained backwardated, meaning contracts for dates further out are more expensive than near-term contracts.
As of Friday, however, futures contracts for the US benchmark WTI crude were trading below current rates through 2026 — a market condition called contango, signaling an incoming surplus.