Bearish sentiment dominates today’s oil market narrative, yet the physical picture is far less gloomy. Inventories at Cushing remain unusually tight for this season, while European hubs show little softness. Market consensus expects stock builds through late 2025 and into 2026, but I remain cautious about their scale. If supply underperforms or demand proves more resilient, actual builds may fall short, and that could keep prices stronger than many anticipate.
China’s slowing role in demand
China’s Strategic Petroleum Reserve purchases are providing temporary support, yet underlying consumption is expanding by just 200, 000 b/d annually, a fraction of past decades. Gasoline has likely peaked, and diesel is losing ground to LNG and electrification. While China remains an important buyer, the baton of demand is shifting. Encouragingly, U.S. consumption has surprised to the upside, and global GDP data have been more resilient than feared, supporting oil demand growth of about 800, 000 b/d this year.
OPEC+ capacity and credibility
Looking ahead, OPEC+ faces a credibility test on baselines and capacity. Russian production data appears overstated, and other members may also be inflating figures ahead of negotiations. By 2027 or 2028, the world may discover that true spare capacity is far slimmer than assumed. If non-OPEC supply slows in parallel, what appears today as a surplus could flip into deficit, strengthening OPEC’s hand and reshaping price dynamics.