Analysts Express Concern Over Global Oil Glut As High Prices Crush Demand

The global crude oil market is moving back towards oversupply, predicts to analysts from Goldman Sachs and JPMorgan, with demand destruction from high prices causing fears of a deficit to fade and concerns of a glut to rise.

“We estimate the global oil market returned to a surplus of 1.1 million barrels per day ‌in September, widening to 1.4 million bpd in October, nearly matching last year’s average of 1.3 million bpd,” JP Morgan said in a report this week.

Goldman, meanwhile, saw the oil market as being balanced in both September and October, amid reports of recovering oil exports out of the Persian Gulf and despite intensified Iranian attacks on tankers in the Strait of Hormuz, with five of these reported since Sunday alone.

The investment bank also reported that it did not detect any global oil inventory declines over the last two months, after a string of draws in previous months to keep a lid on fuel prices.

If prices are any indication, the glut call may be a bit premature. Futures are still substantially higher than they were at the start of the year, and so are physical prices, with the war premium still very much alive if a little weakened after the Democrats’ sweeping victory in the U.S. midterm elections.

As for the recovery of oil flows out of Hormuz, Vortexa earlier this week reported it had calculated these at 14 million barrels daily, including condensates. This is 86% of pre-war levels, the firm said. However, “October data shows Middle East seaborne oil exports have pulled back slightly from recent post-war highs on heightened risks in the Strait of Hormuz,” analyst George Morris noted.

In its latest monthly Oil Market Report, the International Energy Agency (IEA) estimated the destruction of oil demand this year at 2.6 million barrels daily. At the same time, the agency estimated a supply recovery of 2.5 million barrels in September, but warned that annually, supply will suffer a decline of 5.8 million barrels daily, to a total of 100.7 million barrels daily