Oil stocks rose today despite a hit to prices on warnings of a supply glut by the end of the year.
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The price of Brent Crude was down around 1.3% in mid-trading after a warning from the International Energy Agency (IEA) that OPEC nations like Saudi Arabia were ready to switch on the taps despite weakening global demand.
Oil Collision
The IEA warned that this supply and demand imbalance would collide in the last three months of the year hurting prices. Despite this, the BP (BP) share price rose 0.13%, Shell (SHEL) was up 0.55% and Chevron (CVX), was also up 0.5%.
The IEA cut its forecast for global demand growth this year to 680,000 barrels a day. This is a third lower than its prediction in January this year and the weakest pace since 2009 apart from the Covid 2019 slump.
The main issue with demand is the continued global geopolitical uncertainty and it is particularly notable in China, India and Brazil. All three of these countries, of course, are in the firing line for hefty tariff hikes from President Trump.
This weakening in appetite comes as the OPEC oil cartel looks to lift production. The IEA forecasts that supply will grow by 2.5 million barrels a day this year, a third higher than previous estimations.
As can be seen above this uncertainty has led to huge volatility in the oil price this year.
Supply Puzzle
OPEC, however, made its own predictions today – and they didn’t match those from the IEA. It believes that oil demand will climb by 1.38 million barrels of oil a day in 2026, double the forecast from the IEA.
There is also added confusion given figures from U.S. Energy Information Administration, which suggests that over 300 million barrels of oil have been put into storage so far this year, with the IEA declaring that it is actually 225 million barrels.
Analysts warn this uncertainty is making it harder to fully price in the impact of oversupply making the sector even more tricky for investors.
“The peak of the supply glut will be at the end of 2026, according to the IEA, which could keep a lid on the oil price for the long term,” said Kathleen Brooks of XTB. “The discussions between President Trump and President Putin on Friday could also be weighing on the oil price. If they do find a solution to the war in Ukraine, then it could exacerbate the supply glut even further, and the bias could be to the downside for the oil price as we lead up to the talks.”
Is BP a Good Stock to Buy Now?
On TipRanks, BP has a Moderate Buy consensus based on 4 Buy and 6 Hold ratings. Its highest price target is $40. BP stock’s consensus price target is $34.75, implying a 2% upside.
