The increase in oil production in countries that are not part of OPEC+, including the US, may oversaturate global demand, which is growing slowly, and will lead to lower prices.
Although the OPEC+ oil cartel is cutting its output in response, traders are skeptical that the cuts will be enough to outpace the supply glut. The combination has already led to the first one-year drop in oil prices since 2020, dashing any hopes of a price recovery as the global economy recovers from the pandemic.
The Brent crude oil futures curve has been in a bearish contango structure for most of December, with short-dated barrel contracts trading at a discount to later ones. Net long positions held by non-commercial players in major oil contracts are, on average, at their lowest level on record since 2011, Bloomberg data says.
According to the International Energy Agency’s latest market review, global consumption growth is set to slow as economic activity weakens.