Both OPEC and the IEA revised their oil demand forecasts again this week, notes Commerzbank commodities analyst Carsten Fritsch.

The oil market will face significant oversupply next year

“OPEC currently expects growth of 1.9 million barrels per day this year and 1.7 million barrels per day next year. This is in any case 100,000 barrels per day less than the previous forecast. Nevertheless, OPEC remains much more bullish than the IEA. This year’s downward revision is due to China, for which OPEC expects demand to augment by 580,000 barrels per day, while the IEA expects only 150,000 barrels per day.

“The IEA also expects Chinese demand to grow only slightly more next year, by 220,000 barrels per day. In the light of the data on imports and processing of Chinese crude oil published this week, we consider the lower IEA forecast to be more realistic. In September, crude oil imports were lower than a year ago for the fifth month in a row, and crude oil processing was lower for the sixth month in a row.”

“Based on OPEC demand forecasts, the oil market will be significantly undersupplied this year and next, even if voluntary OPEC+ production cuts were to be phased out as planned from December. In turn, according to IEA forecasts, next year the oil market will face significant oversupply.