Oil Market Glut Fears "Completely Overplayed" According to Jeff Currie

Overestimation of Oil Supply Glut

Jeff Currie, chief strategy officer of energy pathways at Carlyle, has stated that the oil market is "dramatically overestimating" a supply glut. He made these comments at the Asia Pacific Petroleum Conference (APPEC) in Singapore, where he countered the bearish views about demand and global market balances for the year and the next expressed by executives of major oil trading houses. Currie believes that the perceived weaknesses in Chinese demand are being deeply exaggerated and that U.S. crude oil production has remained essentially flat this year.

Record Short Positions Reflect Overestimation

Currie further pointed out that the overestimation of the oil supply is reflected in record short positions. He stated, "The key issue there is, the market is dramatically overestimating that flood [in oil supply], and it’s reflected in record short positions … and I’ve never seen anything like that." This was reported by CNBC during the APPEC conference. In the week leading up to September 3, hedge funds and other money managers increased their selling in the most traded petroleum futures contracts. The overall net long position was reduced to its lowest level since such data started being compiled in 2011.

Rising Global Oil Supply and Weaker Demand

Traders have become increasingly bearish on oil prices due to a rising global oil supply and weaker-than-expected demand. This sentiment was echoed by top executives of some of the largest independent oil traders who stated that supply is outpacing demand. Ben Luckock, Global Head of Oil at Trafigura, expects Brent to drop into the $60s, although he advised traders against putting all their eggs in the basket of shorts. Similarly, Gunvor, another major oil trader, expects Brent at $70. Gunvor’s co-founder and chairman Torbjorn Tornqvist told the APPEC conference that Brent’s fair value is $70 a barrel as supply outpaces demand.

OPEC+ Policy Not the Problem

Tornqvist also pointed out that the issue with oversupply is not the OPEC+ policy but rather the fact that the group does not have control over the increase in non-OPEC+ supply.

Bottom Line

It's clear that there are differing opinions on the state of the oil market. While some believe that there is an oversupply, others, like Jeff Currie, argue that these fears are overblown. This raises the question: Are we overestimating the oil supply glut or is there a real concern that needs to be addressed? We'd love to hear your thoughts on this matter. Feel free to share this article with your friends and sign up for the Daily Briefing, which is delivered every day at 6pm.