Oil surplus hits the water
The global oil market may be at a tipping point as signs of a significant supply glut emerge. The overall oil surplus averaged 1.9 million barrels per day (mb/d) from January through September 2025. Crude oil prices remained largely resilient, as stock builds were concentrated in areas that have less direct influence on price formation, notably crude in China and gas liquids in the United States. Crude inventory levels in key pricing hubs remained relatively low. However, more recently, surging supplies from the Middle East and the Americas are pointing to an untenable surplus of nearly 4 mb/d in 2026, making it increasingly clear that something has to give.
Observed global oil inventories built by 225 million barrels from January through August, reaching a four-year high of 7.9 billion barrels. More than one-third of the increase occurred in Chinese crude stocks, which now sit 30% above their 2019 level. China’s substantial stockpiling this year has been underpinned by a new Energy Law, enacted on 1 January 2025, aimed at improving its energy security. With limited storage capacity available in the country’s strategic petroleum reserves (SPR), oil companies are now mandated to increase oil stocks at their own commercial storage facilities, effectively positioning the private firms as long-term strategic storage partners for the government. (For more, read the item “Chinese Government Reforms Unlock the Potential of Companies Stockpiling Reserves” in the July 2025 edition of our Oil Market Report.) (....)