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An oil pump jack is proven in a subject on June 27, 2024 in Stanton, Texas.
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SINGAPORE — World markets are severely overplaying an oil provide glut, mentioned Jeff Currie, chief technique officer of power pathways at non-public fairness big Carlyle.
Considerations a couple of provide glut within the markets are “fully overplayed,” Currie mentioned on the annual Asia Pacific Petroleum Convention in Singapore, attributing it to extreme pessimism about Chinese language demand amid flat U.S. crude oil manufacturing.
U.S. crude prices hit their lowest last week since June 2023 as demand from the world’s largest crude importer stays tepid amid a perceivably oversupplied market.
The important thing situation there’s, the market is dramatically overestimating that flood.
Jeff Currie
chief technique officer of power pathways at Carlyle
“[China’s] weaknesses in demand are being deeply exaggerated by base results and by destocking,” he mentioned at APPEC. China’s crude oil imports in 2023 had notched a record high.
“There’s the transition part, which is transferring vans into LNG, after which there’s the financial weak point. So that you’re down 500,000 barrels per day,” he mentioned, including that the worst of that transition is probably going over.
China’s oil demand has been declining on the again of a stoop in industrial inputs, in accordance the Worldwide Vitality Company. Preliminary knowledge from the company can also be pointing to an prolonged weak point in July, as China’s imports of crude oil dropped to their lowest degree since 2022 throughout strict lockdowns within the nation. China’s August crude oil imports fell 7%.
On the provision aspect, black oil manufacturing within the U.S., one of the world’s top crude oil producers, has been “flat” this yr, Currie mentioned. Black oils embody crude oil, gasoline oil, furnace oil, asphalt and tar. White oils embody gasoline and kerosene.
“The U.S. is producing a document quantity of pure fuel liquids. Liquids should not oil … If you take a look at oil, U.S. manufacturing is flat this yr,” mentioned Currie.
“The important thing situation there’s, the market is dramatically overestimating that flood [in oil supply], and it is mirrored in document brief positions … and I’ve by no means seen something like that,” he added.
In June, Carlyle mentioned it would acquire a portfolio of gas-weighted property with preliminary manufacturing estimated at 47,000 barrels of oil per day. The corporate struck a $945 million cope with Energean to accumulate the latter’s property in Egypt, Italy and Croatia, Reuters reported.
Provide outstrips demand
Different business watchers disagree with Currie’s evaluation on the difficulty of oversupply within the crude market.
“We in all probability are producing rather more oil [on] the vital merchandise than we’re consuming, and that stability is seen to worsen for the following yr,” mentioned Torbjörn Törnqvist, CEO of commodities buying and selling agency Gunvor.
Compounding oversupply issues, oil group OPEC+ is anticipated to extend manufacturing in 2025 in a transfer that might mark its first enhance in three years, mentioned Jim Burkhard, head of analysis for oil markets, power, and mobility at S&P World.
Final week, members of the alliance postponed plans to hike production by a scheduled 180,000 barrels per day in October by two months. The transfer was speculated to be a part of a program to return a broader 2.2 million barrels per day to the market over the next months.
Even when OPEC+ doesn’t hike manufacturing, the world continues to be observing over 5 million drills of unused oil right this moment, Burkhard mentioned.
“Which suggests there’s going to be extra unused capability sitting there on the sidelines, and that’s going to exert a downward strain on costs,” he mentioned.
