New Delhi: Oil prices gained more than $1 on Monday despite OPEC+ announcing another output hike, deepening doubts over the ‘oil glut’ narrative that has long predicted softer prices but has yet to play out.
The benchmark Brent traded near $67 a barrel, broadly unchanged from early April levels, when OPEC+ first unveiled monthly supply increases totalling 2.2 million barrels per day (mbd). Over the weekend, the group announced a fresh plan to raise output by 137,000 barrels per day (bpd) in October as part of its broader strategy to add 1.65 mbd.
Following the move, Goldman Sachs raised its surplus forecast to 1.9 mbd and projected Brent to fall to $53-56 next year, while an S&P Global executive said prices could drop to around $55 by year-end under the weight of higher OPEC+ supply, according to agency reports.
Yet prices remain resilient. Analysts say actual OPEC output is lagging targets and China’s aggressive stockpiling is absorbing much of the excess supply, helping keep the market tight.
“The dominant narrative has been one of a massive ‘oil glut’, but one in which stocks have not been building in the most visible locations, and one in which the market remains in backwardation,” Bassam Fattouh and Andreas Economou wrote in a recent report for The Oxford Institute for Energy Studies. “The common view is that the oil glut is being translated in the buildup of stocks in non-OECD, mainly in China, one of the least transparent locations in the world. But many uncertainties remain around how big these increases are.”
Backwardation refers to a market structure where spot prices are higher than future contracts.
“Until the projected surpluses translate into ‘visible’ and ‘verifiable’ increase in stocks…, the conviction in the ‘oil glut’ narrative and the associated sharp fall in oil price will remain shaky,” the report said.
It also noted that while OPEC+ announced a ceiling increase of 1.37 mbd between March and July 2025, actual production rose only 890 kb/d, or about 65% of the plan.
Executives say China’s stockpiling, driven partly by geopolitical risks, cannot continue indefinitely, and prices are likely to reflect surplus supply next year. Demand growth in China and India, the two biggest drivers, has also been weak this year.
