The Organization of the Petroleum Exporting Countries (OPEC) has surprised crude oil market analysts by revising down its global oil demand growth forecasts for this year and next for three consecutive months, seemingly finally recognizing a sharp slowdown in the scale of global fuel usage. It is understood that OPEC stated in its latest monthly report that global oil consumption will increase by 1.9 million barrels per day (bpd) in 2024, a growth rate of just about 2%, 106,000 bpd less than the organization's previous forecast, and it is expected that consumption will only increase by 1.6 million bpd in 2025.

OPEC's latest monthly report cited the downward revision as "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—plunged significantly, with a drop of over 2% on Monday, continuing the downward trend from last Friday. This official report has also led most crude oil futures traders to begin to believe in the "oversupply" view of oil proposed by Wall Street giants such as Goldman Sachs and Morgan Stanley—that is, starting in 2025, the oil market will experience a situation where supply persistently exceeds demand, thereby keeping Brent crude prices weak.

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With OPEC's three consecutive downward adjustments to the overall oil demand forecast, including crude oil and various refined petroleum products obtained after processing, OPEC has finally begun to abandon its strong bullish forecast that it has held since the beginning of the year. "The decline in demand is indeed worrying, indicating that oil prices will continue to weaken in the future," said Peter Cardillo, an analyst at Spartan Capital, in a statement.

OPEC's confidence begins to wane—the organization has revised down its oil demand forecasts for three consecutive months.

Even after the "OPEC+" organization, which includes countries such as Russia, has made significant production cuts, OPEC's latest oil demand forecast remains an outlier—higher than the expectations of Wall Street giants and some commodity trading companies, and at the high end of the forecast range of the Saudi oil giant—Saudi Aramco. This is about twice the rate of demand growth expected by the International Energy Agency (IEA), which has been pessimistic about oil demand since the beginning of the year.

The actions of many OPEC member countries themselves also indicate a lack of confidence in the demand outlook reports issued by OPEC headquarters in Vienna. Despite the organization's forecasts pointing to a potential situation favorable to crude oil prices, such as significant supply shortages, they continue to delay plans to "restore crude" and increase production.

Led by Saudi Arabia, OPEC+, which includes OPEC and its allies, will gradually restore production by 2.2 million bpd starting in December, two months later than originally planned. However, market observers from Wall Street giants such as JPMorgan and Citigroup Inc. remain deeply skeptical about whether these production increase projects can continue to move forward amid slowing demand growth in major oil-consuming countries like China and India, and a surge in supply in the Americas.

Although the Brent crude price, which best reflects the strength of oil demand, continues to be driven by geopolitical conflicts in the Middle East, the current trading price of $77 per barrel, down from a high of $90 per barrel this year, is too low for some OPEC countries like Saudi Arabia. It is also worth noting that the significant production cuts made by OPEC+, including OPEC and its allies, to support oil prices have been disrupted by countries that failed to achieve production cuts—especially Iraq, Kazakhstan, and Russia. Russia, in particular, has been injecting cheap Russian oil into the market in its eagerness to obtain substantial revenue to invest in the Russia-Ukraine conflict.

The report also shows that OPEC member country Iraq has not made positive progress in implementing its share of the production cuts it was supposed to undertake since the beginning of the year and continues to exceed its agreed quota.

The report indicates that Iraq reduced its daily production by about 155,000 bpd in September, dropping to 4.112 million bpd, close to its 4 million bpd production cut target, but still remaining above this target—demonstrating that Iraq, following Russia's footsteps, has not made any progress in the promised additional production cuts to compensate for overproduction. However, an Iraqi official stated over the weekend that the country's production is already below the quota.Kazakhstan has increased its daily production by 75,000 barrels, reaching 1.545 million barrels, violating its commitment to reduce output. Russia continues to breach its promise to cut production, only reducing by 28,000 barrels per day, which is still significantly higher than the production cap indicated by its quota.

It is anticipated that OPEC+ will make a formal decision on its planned increase in production in December within the next few weeks. Major Wall Street banks generally expect OPEC to continue implementing production cuts to support oil prices, rather than going against the trend and restoring production. The alliance will hold a meeting on December 1st and review its production policy for 2025.

Is the pessimistic expectation of "oversupply" about to become a reality?

Last week, the benchmark crude oil price—Brent crude—soared to over $80 per barrel, mainly due to the renewed tensions between Israel and Iran. However, since then, the persistent negative concern over "oversupply" has continued to ferment, and OPEC's latest report has further reinforced traders' expectations of an imminent oversupply in the oil market. Brent crude prices have remained weak in recent days and have now fallen back to around $77 per barrel.

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

The complete shift in the oil market towards the expectation of "oversupply" is the core logic behind the majority of investment institutions' bearish outlook on Brent crude prices for 2025. Ben Luckock, the head of oil trading at Trafigura Group, recently stated that Brent crude prices could soon enter the pessimistic range of $60. The commodity giant Trafigura Group, which has long been bullish on crude oil, rarely agrees with the "oversupply" view.

Recent research reports from Wall Street banks Morgan Stanley and Goldman Sachs indicate that after the end of 2024 or the beginning of 2025, the entire oil market may shift from a slightly tight supply-demand balance to a potential surplus. Goldman Sachs even predicts that Brent crude trading prices could fall to a cyclical low of $61 per barrel.

Exane BNP Paribas, the securities division of BNP Paribas, downgraded ExxonMobil's stock rating from "neutral" to "underweight," setting a target price of $105 (compared to the company's stock price closing at $123.610 on the U.S. stock market last week). The stock of this long-term leader in the U.S. oil and gas industry is rarely given the most negative ratings of "underweight" or "sell," and this is the first time in over a year that an investment institution has given it an "underweight" rating, implying that the stock price may fall further due to weak crude oil prices.

Lucas Herrmann, an analyst from BNP Paribas, also downgraded the stock ratings of BP (BP.US) and Spain's largest oil company Repsol (REPYY.US) from "outperform" to "neutral," citing the imminent severe overcapacity of "OPEC+" as a negative outlook that "hangs over the entire oil industry like the Sword of Damocles." He also stated that these three traditional energy companies all face the risk of extremely weak refining profit prospects.

Analyst Herrmann stated that, given the dynamic changes in demand and supply in the oil market, the global crude oil benchmark—Brent crude—could soon fall to $60 per barrel. Therefore, "we suspect that investors' interest in investing in the oil industry will be more significantly challenged."