Summary of the Conference Call on Oil Price Forecast Industry Overview - The analysis focuses on the oil industry, specifically the Brent crude oil market and OECD commercial stocks. Key Points and Arguments 1. **Price Forecasting Framework**: The company expects Brent prices to decline to the low $50s by late 2026, based on a three-step forecasting framework: - An oil surplus forecast averaging 1.8 million barrels per day (mb/d) from Q4 2025 to Q4 2026 [1] - OECD commercial stocks are assumed to account for one-third of global builds [1] - An increase in OECD commercial stocks by one day of demand (approximately 45 million barrels) reduces the fair value of oil prices by over $3 per barrel [1][7] 2. **Current Stock Trends**: - Global visible stocks have built by nearly 1 mb/d year-to-date (YTD), while OECD landed stocks have only increased by 20 million barrels (or 80,000 barrels per day) YTD [12][9] - The majority of YTD builds are concentrated in oil on water and China stocks, with significant increases in floating storage due to sanctions on producers like Russia, Iran, and Venezuela [12][9] 3. **China's Impact on Oil Stocks**: - China’s total visible oil stocks have built by 0.4 mb/d YTD, with a base case of 0.3 mb/d pace of builds expected from September 2025 to December 2026 [49][52] - An acceleration in China builds to 0.8 mb/d from the current 0.4 mb/d would raise the 2026 Brent average price by $6 per barrel [50][46] 4. **OECD Stocks as Price Predictors**: - OECD commercial stocks are confirmed to predict Brent timespreads better than total global stocks, even when including estimated invisible non-OECD stocks [1][17] - A 1% rise in OECD commercial stocks is estimated to reduce the fair value of oil prices by 3% [31][28] 5. **Future Price Expectations**: - Prices are expected to remain near current forwards for the rest of 2025 but decline below forwards in 2026 as OECD builds accelerate [46] - The analysis indicates a modest $1-2 upside risk to the 2026 average Brent forecast [46] Additional Important Insights - The analysis highlights the importance of OECD stocks in predicting oil prices, emphasizing their reliability compared to non-OECD data due to better visibility and historical data quality [24][25] - The report discusses the structural trends in OECD versus non-OECD demand, raising questions about the appropriateness of using OECD stocks for global price predictions [17][66] - The company’s refined three-step framework suggests that OECD commercial stocks will build at a pace of 0.6 mb/d through 2026, consistent with their balance estimates [45][46] This summary encapsulates the critical insights from the conference call regarding the oil market, focusing on price forecasts, stock trends, and the predictive power of OECD commercial stocks.