Increasing oil supply is emerging as the main concern for crude traders

Rising global oil supply appears to be at the top of the list of concerns for oil trading giants and industry analysts, according to speakers at the Asia Pacific Petroleum Conference (APPEC) in Singapore this week.

Many at the event expressed more concern about future supply than about slowing demand.

While acknowledging that demand has exceeded expectations this year, leading analysts and top executives from oil traders fear a growing oversupply next year. The OPEC+ group plans to phase out its ongoing production cuts through 2025 and is set to add about 2 million barrels per day (bpd) of supply by the end of next year, according to the current production schedule.

With global oil demand expected to grow at a much slower pace and with non-OPEC+ producers continuing to add supply outside OPEC+ control, the oil market balance is tipping further into oversupply, according to analysts .

Demand, on the other hand, didn’t do much to absorb the entire increase in supply. China has disappointed so far this year due to its housing crisis and disappointing economic growth. Structural changes in transportation, such as the uptake of electric vehicles and the growing share of LNG-fueled trucks, have also affected China’s road fuel demand.

China’s oil demand growth has slowed to around 200,000 bpd each year, compared with annual growth of 500,000-600,000 bpd in the five years before Covid, Goldman Sachs head of oil research Daan Struyven told APPEC.

China’s shift to electric vehicles will lead to a peak in domestic gasoline demand either this year or next, according to Vitol Group managing director Russell Hardy.

Jeff Currie, director of energy strategies at Carlyle, stands out as a more optimistic voice among the largely bearish outlook. Currie told APPEC that oil market participants are “dramatically overestimating” the supply glut because Chinese demand is not as bad as headline numbers suggest and U.S. crude production is basically flat this year.

By Charles Kennedy for Oilprice.com

More top reads from Oilprice.com