Price Performance Summary

In the first week, OPEC announced a modest November output increase of only 137,000 bpd (below expectations), briefly pushing prices higher. But after a Gaza ceasefire agreement reduced geopolitical risk premiums, oil prices turned lower. Further pressure came as former President Trump criticized China and threatened new tariffs, intensifying trade concerns and dragging prices down roughly 3.5% for the week.

In the second week, Trump’s conciliatory tone toward China initially lifted prices, but bearish sentiment from the IEA’s monthly report and the announcement of a Russia–Ukraine peace summit in Hungary caused oil to fall again, ending the week down another 2%.

Crude Oil Data Update

Crude Inventories Build, Gasoline Demand Steady, Producer Investment Bottoming Out

U.S. commercial crude stocks rose by 7.3 million barrels over two weeks, still at a healthy level, reflecting pre-season restocking. The SPR also increased slightly by 1 million barrels, indicating a steady refill pace. Product demand remains firm—gasoline inventories fell by 2.3 million barrels, better than expected, showing resilient consumer demand even after peak season. Distillate stocks fell sharply by 6.6 million barrels, far exceeding expectations, signaling steady industrial and freight activity and strong diesel exports. On the supply side, refinery utilization dropped 5.7 percentage points due to scheduled maintenance ahead of winter—likely temporary. The active rig count fell by six, likely tied to seasonal refinery downtime rather than weaker production outlook.

Agency Reports Updates

No Major Forecast Changes; OPEC and IEA Diverge Sharply on Outlook

EIA

The EIA raised its 2025 U.S. GDP growth forecast to 1.8%, reflecting recent upward revisions to prior data. It also increased 2025–26 crude supply estimates and slightly adjusted demand expectations (up for 2025, down for 2026), showing uncertainty about mid-term momentum. The report noted that OPEC+ output remains below target, implying room for higher supply, while U.S. production continues to exceed expectations, remaining the primary driver of global growth. With inventories rising and storage costs climbing, the EIA sees downward pressure on prices, forecasting Brent at $62/bbl in 4Q25 and $52/bbl in 1H26, about $3 higher than its prior forecast.

IEA

The IEA raised supply growth but trimmed demand growth slightly, maintaining a view that global oil markets will remain oversupplied. It projects annual oil demand growth of just ~700,000 bpd in 2025–26—well below historical averages—due to weak macro conditions, rising vehicle efficiency, and strong EV sales. However, the IEA noted that petrochemicals will regain their role as the main driver of oil demand growth. It also emphasized that global oil inventories, especially floating storage, have surged to the highest levels in over two years, underscoring its bearish stance.

OPEC

OPEC left its global supply-demand forecasts unchanged. It highlighted stronger-than-expected 2Q GDP growth in the U.S. and Japan, with the U.S. upward revision offsetting earlier tariff-related weakness. OPEC expects global economic strength to persist through 2025–26 as countries adjust trade routes and adapt to the evolving global order. The group remains relatively optimistic on oil demand and noted that as members gradually increase output, the supply gap should narrow significantly by 2026—reflecting OPEC’s view that non-OPEC supply growth will remain insufficient to meet rising demand.

Researcher Commentary

This month saw a clear divergence between OPEC and IEA demand forecasts. The market has leaned toward the IEA’s view, as reflected by post-report price declines. The IEA’s modest demand downgrade stems from slower global growth and rapid EV adoption. According to Rho Motion, global BEV and PHEV sales rose 26% YoY in September, signaling accelerated substitution effects. Still, with the U.S. EV tax credit set to expire year-end and lower oil prices ahead, gasoline vehicle sales could stabilize or rebound modestly next year.

OPEC maintained its optimistic tone on economic growth and oil demand but has gradually turned more pragmatic, omitting some of its earlier bullish assumptions. However, it notably did not address the rising global inventory issue raised by the EIA and IEA. Continued OPEC output growth could widen the potential supply-demand gap.

Fundamentally, U.S. refined product markets remain solid. Gasoline continues to draw inventories at a healthy pace, while distillates show even stronger draws—indicating resilient industrial and freight demand. The latter strength, however, may partially reflect temporary trade shifts following Russian refinery disruptions.

Overall, the early-October price pullback reflected sentiment adjustment rather than a deterioration in fundamentals. In the near term, easing geopolitical risks and possible U.S.–China trade progress could support a rebound. Of note, recent reports that India (≈6% of global demand) may halt Russian crude imports—if true—could tighten supply. While China (≈17% of demand) could absorb part of the excess, prices would likely gain upward momentum.

U.S. refined product fundamentals remain robust post-peak season, with steady drawdowns and firm demand. While markets have reacted pessimistically to the IEA’s report, its demand downgrade mainly reflects short-term EV-driven substitution and macro softness—factors whose persistence remains uncertain. OPEC, on the other hand, appears overly optimistic and risks aggravating imbalance through continued output growth. In the short term, Russia–India energy flows and U.S.–China trade dynamics will be key catalysts. If India truly curtails Russian crude imports, oil prices could face renewed upward pressure.