Echoing what has become a now daily refrain by commodity bears everywhere, Saad Rahim, chief economist of commodity-trading giant, Trafigura, said that the oil market faces a “super glut” next year as a burst of new supply collides with weakness in the global economy. According to Rahim, new drilling projects and slowing demand growth would weigh further on already depressed crude prices next year.
“Whether it’s a glut, or a super glut, it’s hard to get away from that,” Rahim said in remarks alongside the company’s annual results.
Brent crude has fallen 16% this year, on track for its worst year since 2020. Prices are expected to be further damped by major projects coming online next year, including in Brazil and Guyana.
The glut thesis is hardly new, and has been popularized by banks such as Citi and Goldman for the past year. As Goldman analyst Daan Struyven wrote in his latest oil tracker note, “global visible oil stocks have built by nearly 2mb/d over the past 30 days.” The banks expects them to grow significantly more in the coming years.
Meanwhile, demand from China, which is widely seen as aggressively stocking its strategic petroleum reserve by 500kb/d (and as much as 1 mm/d according to some estimates) and is the world’s biggest oil importer, is expected to grow more slowly next year due to its huge fleet of electric vehicles, which have sharply reduced petrol demand. Low prices this year have prompted China to buy more crude to fill its strategic stockpile.
“China needs to keep buying at this rate, for that super glut to not show up even earlier,” Rahim added.
The US government has also been trying to keep oil prices low, and President Donald Trump has pledged to “drill, baby, drill” in a push to increase American production. There has also been speculation that the US will also refill its SPR which was largely emptied by Biden but since that will promptly drive prices higher, so far this has been nothing but speculation, and meanwhile the US barely has any reserves for a true emergency.
Ben Luckock, head of oil trading at Trafigura, said in October that he expected oil prices could fall below $60 a barrel before rallying. “I suspect we’ll go into the $50s at some point across Christmas and the new year,” he said at the time.
According to the FT, Trafigura reported net profits of $2.7bn during the fiscal year that ended in September, down slightly from $2.8bn the previous year, and a five-year low after years of bumper profits linked to Russia’s full invasion of Ukraine when most commodity traders were breaching sanctions and making a killing in the process.
Its non-ferrous metals trading division reported a record year, due in part to the profits made by shipping copper into the US amid the disruptions caused by whipsawing tariff rules, according to people familiar with the matter.
Trafigura CEO Richard Holtum said “significant headline-driven volatility” had been a major driver for markets this year and that the trend would continue in 2026.
“Trading conditions were not easy last year and our trading team put on a really credible performance across all divisions,” said Holtum.
However, the small drop in profits, combined with rising payouts to Trafigura’s employee-shareholders, meant group equity fell slightly, to $16.2bn, from $16.3bn the previous year, marking the first time this figure has shrunk since 2018.
Payouts to Trafigura’s employees rose to $2.9bn, up from $2bn during the prior year. The company, whose top management is based in Geneva, pays out “dividends” to its employee-shareholders, including by buying back the shares of departing employees over time.
By Zerohedge
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