Oil market participants are “dramatically overestimating” the risk of a supply glut, according to Jeff Currie, Chief Strategy Officer of Energy Pathways at Carlyle. Speaking at the Asia Pacific Petroleum Conference (APPEC) in Singapore on Tuesday, Currie challenged recent bearish outlooks on oil demand and production.
Currie argued that fears of a major oil surplus are “completely overplayed.” He pointed out that Chinese demand is not as weak as some reports suggest and that U.S. crude oil production has remained steady this year. “The market is dramatically overestimating the extent of this flood in oil supply,” Currie said. He highlighted record levels of short positions as evidence of this overestimation, noting that such levels are unprecedented.
Recent data shows that hedge funds and other investors have been selling off significant amounts of petroleum futures. As of the week ending September 3, portfolio managers reduced their net long positions—the difference between bullish and bearish bets—to the lowest level since data collection began in 2011.
Despite rising global oil supply and weaker-than-expected demand, which have led traders to adopt a more bearish stance, some major oil traders maintain a cautious outlook. Ben Luckock, Global Head of Oil at Trafigura, expects Brent crude to fall into the $60 range but advises against relying solely on short positions.
Similarly, Gunvor, another prominent oil trader, forecasts that Brent will hover around $70. Gunvor’s co-founder and chairman, Torbjorn Tornqvist, stated at the APPEC conference that $70 a barrel is Brent’s fair value due to the current supply-demand imbalance. He added that the issue with oversupply is less about OPEC+ policy and more about the surge in non-OPEC+ supply, which the group cannot control.