Oil Prices: Market Can't Absorb Increase in Supplies, IEA's Bosoni Says

Demand and Supply Dynamics - Oil demand growth is slowing, currently at around 700,000 barrels per day [1] - There is record oil supply due to the unwinding of OPEC's cuts, adding approximately 1.5 million barrels per day since Q1 [2] - The market has absorbed the supply glut so far, with crude demand at record highs in Q3 due to refinery throughputs and direct crude burn [3] Market Conditions - Surplus oil is not piling up in key markets yet, but this may change towards the end of the year [4] - Prices are trending lower, nearing a three-year low, despite the current market dynamics [4] - The surplus has been absorbed by Chinese stockpiling and inventories elsewhere, but risks remain from sanctions on Russia and Iran [5] OPEC+ Strategy - OPEC+ may be making a mistake by increasing production further, as the market has absorbed the increase so far [6] - Crude oil stocks are below the five-year average, indicating room for additional barrels [7] - Future adjustments will depend on the strength of oil demand growth and continued stockpiling by consuming countries [8] China's Role - China has absorbed about 100 million barrels of crude oil from February to August this year, which helps mitigate the surplus [9] - Continued purchases by China could provide a floor under prices, as they are sensitive to price changes [10] - However, the projected surplus of 3 million barrels per day is deemed untenable for the market to absorb [8][9] Adjustments in the Market - U.S. producers are adjusting strategies and growth forecasts in response to the well-supplied market and lower prices [11] - OPEC+ is actively managing the market, meeting monthly to assess the situation [12] - The first tranche of production cuts has been completed, and a second tranche is starting, with a commitment to a smaller increase than previously anticipated [13][14]