Jeff Currie, Chief Strategic Officer for Energy at the private equity giant Carlyle Investment Group, said that the global market has greatly exaggerated the situation of oil oversupply, as China's demand is not as pessimistic as the overall data suggests, and US crude oil production has remained basically stable this year.

Currie, speaking at the annual Asia-Pacific Petroleum Conference in Singapore, said concerns about market oversupply have been 'completely exaggerated' and attributed it to excessive pessimism about China's demand at a time when US crude oil production is flat. Last week, US crude oil prices fell to the lowest level since June 2023, and this week continued to fall to a three-year low, believed to be due to tepid demand from China, the world's largest crude oil importer, in an apparent oversupplied market. Executives from major oil trading companies expressed pessimism about demand in the next two years and the global market balance.

'(China's) weak demand has been greatly exaggerated by base effect and destocking,' Currie said at the Asia-Pacific Economic Cooperation. China's crude oil imports reached a record high in 2023. 'There is a transitional part, which is trucks transitioning to liquefied natural gas, and then the weak economy. So demand decreases by 0.5 million barrels per day,' he added, suggesting that the worst of the transition may already be over.

The International Energy Agency (IEA) has stated that China's oil demand has been declining due to a significant drop in industrial input. Preliminary data from the agency also shows that China's crude oil imports in July fell to the lowest level since 2022, the lowest level during the pandemic lockdown. China's crude oil imports continued to decline by 7% in August.

On the supply side, Currie stated that as one of the world's largest oil-producing countries, the US has maintained a 'flat' production of black oil this year. Black oil includes crude oil, fuel oil, furnace oil, asphalt, and tar. White oil includes gasoline and kerosene.

'The US is producing record amounts of liquefied natural gas. Liquefied natural gas is not oil... look at oil, US production has remained flat this year,' said Currie.

He added, 'The key issue is that the market has greatly overestimated the excess (oil supply), which is reflected in record short positions... I have never seen a situation like this.'

Other industry observers disagree with Currie's assessment of oversupply in the crude oil market. Torbjörn Törnqvist, CEO of Gunvor, a major commodity trading company, said, 'Our oil production in key products may far exceed our consumption, and this imbalance is expected to worsen next year.' Tornqvist stated that the issue of oversupply is not due to OPEC+'s policies, but rather the organization's inability to control the growth of non-OPEC+ supply.

Jim Burkhard, S&P Global's Head of Oil Markets, Energy and Liquidity Research, said that OPEC+ is expected to increase production in 2025, marking the first increase in three years and deepening concerns about oversupply. Last week, the alliance members postponed their original plan to increase daily production by 0.18 million barrels in October by two months. This move was supposed to be part of a plan to supply the market with 2.2 million barrels of crude oil per day in the coming months. Burkhard said that even without an increase in production by OPEC+, there is still over 5 million barrels of idle capacity in the world today. He said, 'This means there will be more unused capacity idle, which will exert downward pressure on prices.'

Editor/Rocky