China remains the key driver of demand.

When you look at pure market balances, they don't look great for next year. In Q1, we're probably going to see significant surpluses. There are also many geopolitical issues that are currently supporting the market. Another factor is that many investors became overly bearish. Positioning, especially by smart money, was heavily short. People are now realizing that, under certain geopolitical circumstances, that might not have been the wisest strategy. Still, I am not fundamentally bullish for next year. China might experience negative demand growth this year, and next year it will likely rebound modestly because the government has no choice but to address poor economic figures. India, which is often seen as a secondary driver, isn't expected to perform exceptionally well. Approximately 6 million barrels of oil goes from the Middle East to China and 2 million barrels to India. If both countries grow by 5% next year, that translates to an increase of 300, 000 barrels from China and 100, 000 from India. So, due to its sheer size, China remains the key driver of demand, even when growth percentages seem small. On the supply side, all producers are positioning for more exports, so it’s hard to get very bullish, despite some markets being in contango. The front end of the Brent market looks well supported, but longer term, I think OPEC+ will be forced to kick the can down the road and continue to cut - they would destabilize the market if they were to add a couple of hundred thousand barrels a month from now on.

Could we see forecasts on oil demand converge next year?

The divergence that we have is purely political. It has nothing to do with forecasting. We’re in the early stages of the Energy Transition, and no one can accurately forecast demand over the next ten years. Those predictions will always depend on government policies. This is particularly concerning for OPEC and many oil-producing countries because a strong focus on achieving net-zero emissions could become a self-fulfilling prophecy. Essentially, OPEC is advocating to downplay net zero, even though they acknowledge climate change is real. Their stance is: let’s not take action, because doing so would hurt their interests. From a broader perspective, there’s also a clear difference in outlook depending on where you are in the value chain. Downstream margins are extremely weak, especially in China. For example, Sinochem recently attempted to sell three refineries, and there were no bids. In Europe, refineries are closing, and many are in serious trouble due to declining gasoline demand. OECD oil demand peaked in 2005. Now, we’re seeing diesel demand decline in China and India. Alternatives are emerging, whether we like it or not, and overall demand is expected to peak this decade, regardless of policy decisions.