Today OPEC might announce another increase in their crude output levels. We expect it to the tune of 400,000-500,000 bpd against current market estimates of 150,000-200,000 bpd. We believe Saudi is trying to corner market share of Russia which it hopes might be falling due to sanctions as well as India likely reducing imports from Russia due to US pressure. But is the Russian crude exports falling any time soon? We don’t believe it is even after repeated Ukranian attacks on it’s oil infrastructure as we detail below. So, both Saudi and Russia are trying to out do each other with more and more supply. For one it is about market share and for other it is about critical revenues in war times. Coming to physical demand supply, supply is growing by leaps and bounds. Brent oil prices have already fallen to $65 following Iraq seeing Kurdistan oil exports resume via Turkey after a prolonged 2-and-a-half-year suspension. We believe September marked a turning point, with the oil market now heading towards a sizeable surplus in 4Q25 and into next year. Middle East demand is declining seasonally, freeing up volumes for exports. As a result, the Middle East could potentially release an additional 0.5mbpd to global markets from October onward, simply due to reduced domestic demand. Stock builds are accelerating in the fourth quarter as refinery runs decline by 2.6 mbd from August to October due to maintenance, while demand softens by 0.9 mbd seasonally during the same period. Crude exports from the OPEC+ alliance jumped to the highest in 28 months in September, a sign that the volumes freed from seasonally softening demand and output hikes are starting to hit global markets. The loosening of Dubai crude, which turned Brent-Dubai from deeply negative back to positive in recent days can imply more medium-heavy oil supply being made available. Russian exports continue undiminished. Ukrainian drone strikes on Russian energy infrastructure have caused localized damage to refining capacity, restricting oil-product exports and driving Russian fuel prices to record highs. This, in turn, has freed up more crude for Russia to send externally, and despite multiple attacks on two port facilities and connecting pipelines, there are no indications of export disruptions; in fact, crude exports have surged to new highs. On demand side, Chinese SPR demand is supporting Brent prices to not fall below 60 levels. China's crude inventories, including oil on water and underground stocks, now stand at 1.25 billion barrels, surpassing the levels reached in August 2020 at the height of the COVID shutdown. Despite hopes for a diplomatic reset at the upcoming October 31-November 1 APEC Summit in South Korea, China remains cautious and continues to build oil reserves, with ample storage capacity still available. We also believe that keeping low oil prices is a key priority for current US administration. Given the multitude of existing and forthcoming sanctions on Russia, Iran, and Venezuela which together account for 20% of global supply, Trump administration wants to keep crude well supplied from OPEC. In this background, Saudi Prince MBS meeting with US president Trump in November might ensure sustained output increases from OPEC to keep crude prices subdued. To summarise, for all the above reasons mentioned above, we see sustained supply glut leading to our expectation that Brent prices might fall to 60 level by end CY25. While Saudi is trying to gain market share because it sees the sanctions on Iran, Russia & Venezuela, the above three countries continue to export crude through channels which defy sanctions. Today OPEC meeting is another milestone in this fight for market share.
