Oil markets face a triple challenge over the next few months:
• OPEC+ has begun another price war versus US shale producers as a way to preserve its market share
• The global and US economies are slowing as a result of President Trump’s Trade War
• Near-record levels of oil stocks are building at sea (as the Bloomberg chart shows) and in China

And oil market ‘technicals’, which have a wide following amongst hedge funds, are still bearish.

As the chart shows, Brent prices have been falling slowly, but steadily since then. As we have noted before:

“The “triangle” is one of the most reliable ‘technical’ indicators in commodity markets. It highlights the battle between the bulls and bears, and describes how the range is narrowing – until one side “wins” and the other side gives up. At which point, prices usually start to move a long way.

It has certainly proved a good guide to oil markets in recent years, as we have monitored here.”

The top chart highlights the size of the current inventory build. As Bloomberg notes:
“The total amount of oil in transit climbed to 1.2 bn bbls, according to Vortexa data, the highest since at least 2016. If ships carrying oil but not moving are added, the figure is the highest since 2020. Then a global pandemic ravaged demand and traders stored barrels on everything from giant supertankers to tiny barges.”

At the same time, China has been rapidly expanding its own storage as the Reuters chart shows. It is aiming to have 1bn bbls in storage – versus the US at 404mbbls.

Reuters estimates today’s volume at 909mbbls and reports:
“China has stockpiled an average of 530,000 barrels per day thus far in 2025 and is soaking up surplus global supply. This is supporting prices as the OPEC+ producers group winds down production cuts.”

Even the US government’s Energy Information Administration expects prices to fall, as their chart shows:
“We expect global oil inventories to rise through 2026, putting significant downward pressure on oil prices in the coming months. We forecast that the Brent crude oil price will fall to an average of $62 per barrel (b) in the fourth quarter of 2025 and $52/b in 2026.”

The issue for OPEC, as the International Energy Agency notes in its latest Report is that:
“Non-OPEC+ oil supply growth continues apace, with output from the United States, Brazil, Canada, Guyana and Argentina at or near all-time highs. Non-OPEC+ producers are now on track to boost production by 1.4 mb/d in 2025 and by just over 1 mb/d next year.“

OPEC plans to add another 2.3mbd over the same period.

Global output is therefore expected to grow by 4.7mbd in 2025-6, whilst demand is only forecast to grow 1.4mbd.

STORING OIL IS NOW MORE EXPENSIVE WITH HIGHER INTEREST RATES
Storing oil is good news for shipowners, of course. But it is more expensive than when it was last used in 2020 during Covid.
• Interest rates are much higher today, as Bloomberg notes
• Prices will need to fall into contango (where today’s prices are lower than for future delivery)
• Otherwise traders can’t afford to store the product

And, of course, the Gaza peace deal may well add further pressure if it reduces tensions in the Middle East. A nuclear deal with Iran might come back to the table. And Houthi attacks in the Red Sea might also reduce.

Falling prices are also reducing short-term demand, as companies destock down the value chain.

Demand is already weaker than usual in Q4 due to the Trade War. Destocking will further reduce it in the run-up to Christmas.
Source: ICIS, https://www.icis.com/chemicals-and-the-economy/2025/10/todays-oil-market-appears-calm-but-risks-are-rising-under-the-surface/