According to the financial app Tencent Finance, the Organization of the Petroleum Exporting Countries (OPEC) has continuously lowered the global oil demand growth rate forecast for this year and next year for three consecutive months, surprising crude oil market analysts. The organization seems to have finally realized that the global fuel consumption scale is rapidly slowing down. It is understood that in its latest monthly report, the OPEC stated that global oil consumption in 2024 will increase by 1.9 million barrels per day, an increase of only about 2%, which is 0.106 million barrels per day less than the organization's previous forecast. It is expected that consumption in 2025 will only increase by 1.6 million barrels per day.

OPEC's latest monthly report stated that the downward revision was mainly due to "actual data received, coupled with slightly lower demand expectations for some key regions." Following the release of this latest monthly report, the international crude oil price benchmark—Brent crude prices plummeted significantly, with a decrease of over 2% on Monday, continuing the decline from last Friday. This official report has also led to most crude oilFutures Trading Commission (CFTC)'s latest data shows that investors are significantly reducing their net short positions in US soybean, corn, and wheat contracts, easing bearish sentiment in the market.employees beginning to believe the Wall Street giants such as Goldman Sachs and Morgan Stanley's view of oil "oversupply"—that is, starting in 2025, the oil market will face a situation where supply continues to exceed demand, thereby keeping Brent crude prices consistently weak.

With OPEC continuously cutting overall oil demand expectations for crude oil and various refined oil products, OPEC has finally begun to abandon the strong bullish predictions it has held since the beginning of this year. 'The drop in demand is indeed worrisome, indicating that oil prices will continue to weaken in the future.' Analyst Peter Cardillo from Spartan Capital stated in a declaration.

OPEC's confidence is starting to wane—the organization has lowered its oil demand forecasts for three consecutive months.

Even after experiencing significant production cuts by the 'OPEC+' group, which includes countries like Russia, OPEC's latest oil demand expectations are still an outlier—higher than the expectations of Wall Street giants and some commodity trading companies, at the upper end of the range expected by the Saudi oil giant Saudi Aramco. This is roughly twice the demand growth rate expected by the International Energy Agency (IEA) which has held a pessimistic stance on oil demand this year.

OPEC's actions by many member countries themselves also indicate a lack of confidence in the demand outlook report released by the OPEC headquarters in Vienna, although the organization's predictions point to a potential bullish situation for crude oil prices such as significant supply shortages, they continue to delay plans to increase production of 'recovering crude oil'.

Under the leadership of Saudi Arabia, OPEC+ including OPEC and its allies will gradually restore a production of 2.2 million barrels per day from December, two months later than the original plan. However, market observers from Wall Street banking giants JPMorgan and Citigroup Inc. still hold deep doubts, believing that with the slowdown in demand growth in major oil-consuming countries like China and India, and the surge in supply in the Americas, these production projects may not be able to move forward.

Although the crude oil price benchmark that best reflects the strength of oil demand—the Brent crude oil price—continues to be driven by geopolitical conflicts in the Middle East, the current trading price has dropped from $90 per barrel touched earlier this year to $77 per barrel, which is too low for some OPEC countries like Saudi Arabia. It is also worth noting that the significant production reduction efforts to support oil prices by OPEC+ including OPEC and its allies have been undermined by countries that failed to implement production cuts—especially those like Iraq, Kazakhstan, and Russia, causing supply-demand disruptions. Russia, in particular, has been injecting cheap Russian oil into the market urgently in order to generate substantial income for the Russia-Ukraine conflict.

The report also shows that OPEC member country Iraq has not made positive progress in fulfilling its agreed production cut share since the beginning of the year, constantly exceeding its agreed quota.

The report indicates that in September, Iraq reduced its daily production by approximately 0.155 million barrels to 4.112 million barrels, close to its 4 million barrel reduction target, but still remains above this target—showing that Iraq, following Russia's lead, has made no progress in additional production cuts promised to offset overproduction. However, an Iraqi official stated over the weekend that the country's production is already below the quota.

Kazakhstan increased its daily production by 0.075 million barrels to reach 1.545 million barrels, violating its production cut commitment. Russia continues to breach its production cut commitments, reducing only 28,000 barrels per day, but still significantly above the production ceiling indicated in its quota.

It is expected that OPEC+ will make a formal decision on its planned production increase in December in the coming weeks, with major Wall Street banks generally expecting OPEC to continue to implement production cuts to support oil prices, rather than counter-trend by resuming production increases. The alliance will have a meeting on December 1 and will review the production policy for 2025.

"Is the pessimistic expectation of 'oversupply' about to come true?"

Last week, the benchmark price of crude oil - Brent crude oil price surged to over $80 per barrel mainly due to renewed tensions between Israel and Iran. However, since then, the negative concern of "oversupply" has continued to ferment. The latest OPEC report has reinforced traders' expectation of an upcoming oversupply in the oil market. The Brent crude oil price has recently shown a sustained weak trend, currently falling back to around $77 per barrel.

Before OPEC released the latest monthly report, the latest EIA data showed that U.S. crude oil inventories unexpectedly increased by 5.8 million barrels in the week ending October 4, exceeding the expected 2 million barrels. This implies that the supply remains ample and market demand has not significantly increased, catalyzing the negative expectation of "oversupply".

The prevalent expectation in the oil market of a complete shift towards "oversupply" is the core logic behind most investment institutions' bearish outlook on the trend of Brent crude oil prices in 2025. Ben Lecok, the oil trading director at Tok Group, recently stated that the Brent crude oil price could soon fall to the pessimistic range of $60. The commodity giant Tok Group, usually bullish on crude oil in the long term, remarkably agrees with the "oversupply" view.

Recent research reports from Wall Street giants Morgan Stanley and Goldman Sachs both indicate that by the end of 2024 or early 2025, the entire oil market may transition from a slightly tense supply-demand balance to a potential surplus. Goldman Sachs even predicts that Brent crude oil trading prices may fall to a periodic low of $61 per barrel.

Exane BNP Paribas, the securities division under French bank BNP Paribas, downgraded Exxon Mobil's stock rating from "Neutral" to "Shareholding", with a target price set at $105 (compared to the company's stock price closing at $123.610 on the U.S. stock market last week). It is rare for the long-term leader in the U.S. oil and gas industry to receive such a "Shareholding" or "Sell" rating, and this is the first time in over a year that the stock has been given a "Shareholding" rating by an investment institution, indicating that the stock price may further decline due to weak oil prices.

Analyst Lucas Herman from French bank Exane BNP Paribas also downgraded the stock ratings of BP Plc and Repsol, the largest oil company in Spain, from "Outperform the Market" to "Neutral" ratings. The reason cited is that the "OPEC+" production capacity is about to face severe oversupply. He mentioned that this negative outlook is "hanging over the entire oil industry like the Sword of Damocles" and stated that all three traditional energy companies are at high risk of extremely weak refining profit prospects.

Analyst Herman stated that due to the changing dynamics of supply and demand in the oil market, the global benchmark Brent crude oil price may soon drop to $60 per barrel. Therefore, "we suspect that investors' interest in oil industry investments will face greater challenges."