Total Recall

Week 46 saw the French bidding oil desperately. And that's the most exciting that happened in an otherwise uneventful week.

In a week without major news affecting the flat price, it was nevertheless an active one for forecasts from the main (governmental?) agencies. This week, projections for 2025 in oil production and demand were released by OPEC, the EIA, and the IEA. All three agencies lowered their expectations for the remainder of the year and for 2025, although the divergence in their forecasts and baseline assumptions borders on the comical. What is truly concerning, however, is the discrepancy between these agencies’ projections and reality. With only six weeks left in the year, even the most pessimistic projections indicate global demand growth between 0.8 and 1.8 million barrels per day. Interestingly, each agency also estimates Chinese demand growth this year between 100 and 450,000 barrels per day. In reality, Chinese demand is actually between 500 and 800,000 barrels per day negative. It's hard to believe how this gap could be bridged in just a month and a half to meet those projections.

To understand how seriously the market takes these projections, one need only observe the market’s reaction when each publication "hit the wire"—there was absolutely none. For this reason, we won’t give them much weight either, as they lack a clear methodology and disregard market dynamics. The most important variable is the price of oil: if it drops enough, demand rises and production falls; if it rises too much, demand falls and production rises—it's as simple as that. Therefore, when these agencies project significant shifts in supply and demand behavior while keeping the average price forecast similar to the current one, it’s quite unlikely that any of these variables will actually hold.

IEA (International Energy Agency):

The Paris-based IEA maintained its forecast for global oil demand growth in 2025 at 990,000 barrels per day (bpd). At the same time, the agency expects non-OPEC+ countries to increase oil supply by 1.5 million bpd, with the largest contributions from the United States, Canada, Guyana, and Argentina—significantly outpacing the projected growth in demand. Consequently, the IEA anticipates that oil supply will exceed demand by more than 1 million bpd in 2025.

OPEC :

OPEC’s latest Monthly Oil Market Report was highly anticipated, though it offered few surprises. The organization downgraded its oil demand growth forecast for 2024 from 1.93 million bpd to 1.82 million bpd, and similarly adjusted its 2025 growth forecast from 1.64 million bpd to 1.54 million bpd. This suggests a more conservative outlook on global demand for oil over the next two years.

EIA :

In its November Short-Term Energy Outlook (STEO), the EIA revised its oil production forecasts upward. Global oil demand is now expected to grow by 1 million bpd in 2024 (up from 900,000 bpd in prior forecasts) and by 1.2 million bpd in 2025. For the U.S., the agency projects average oil output to reach 13.23 million bpd this year, a slight increase from the previous forecast of 13.22 million bpd. The EIA also raised its 2024 world oil production forecast to 102.6 million bpd, up from 102.5 million bpd in the October forecast, reflecting steady supply growth.

This is why the market completely disregards these reports, which seem to serve only to reflect each agency’s own agenda—and if the market ignores them, so will I.

Truthfully, no one knows precisely what is happening in China—it’s a black box. And given the uncertainty surrounding Trump’s policies once back in the Oval Office, making predictions beyond the next two months is a futile exercise.

However, based on what we saw in the physical market this week, we can outline some trends to suggest where oil might head in the coming sessions.

On the surface, this week appeared unremarkable, with little volatility; in fact, it was the least volatile week of the year, reflecting a general sense of uncertainty at these $73 Brent levels. Are there reasons for prices to rise? Few. Reasons to fall further? Not many, either. This week’s dynamics are similar to those of recent weeks—the market is waiting for some key data point to trigger orders. A significant catalyst will be needed to break this $10 range, which benefits no one—certainly not the traders.

Meanwhile, in the real world...