(Bloomberg) — The oil supply squeeze widely expected at the end of last year now looks like it may have been a surplus — a reminder for any remaining crude bulls to tread carefully.
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A year ago, crude traders and forecasters anticipated that the fourth quarter would be the strongest point of 2023, with China’s post-pandemic demand recovery pushing prices up to $100 a barrel. More recently, the Organization of Petroleum Exporting Countries has been predicting a record deficit of 3 million barrels a day.
Yet instead of rallying, oil prices slumped almost 20% in the final three months of the year, and despite turmoil in the Middle East, currently remain below $80 a barrel. The latest oil-market balances published on Thursday help explain why.
The International Energy Agency in Paris — which a year ago projected a shortfall of 2 million barrels a day for the period — estimates that stockpiles actually swelled by 560,000 barrels a day as US production soared.
The reversal should serve as a caution for traders still banking on a price recovery.
OPEC, for example, continues to forecast that global oil markets will remain in a considerable deficit for the rest of this year and through 2025. The cartel’s forecast for demand growth this year is almost double that of the IEA — though its ever-deeper production cuts could be seen as an insurance policy in case those numbers miss the mark.
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