00:00Just, if you would, walk us through these calculations.
00:03An estimate of a record global oil surplus for a six straight month.
00:08Yes, good morning.
00:10What we're seeing in the market today is that global oil supply continues to rise.
00:15We had a slight drop in oil supply globally in October, about 400,000 barrels a day,
00:22led by OPEC production, where we had some maintenance.
00:25But even so, global oil supply was up more than six million barrels a day from the January low point this year.
00:33So, at the same time, we're seeing demand, a relatively modest growth.
00:38We did increase our forecast for growth in global oil demand to about 900,000 barrels a day in the third quarter.
00:46That's double the rate of growth in the second quarter.
00:49But we're seeing average growth expected around 800,000 barrels a day, both this year and next.
00:55So, when we're looking at the supply increase, it's quite broad-based.
01:00Of course, three million barrels a day on growth on average this year,
01:04split evenly between OPEC countries that are in winding production cuts
01:08and continued strong growths from the Americas at the same time.
01:14Okay, so that's the regional divide.
01:15But there seems to be a growing gap, Torrell, in the third quarter,
01:18on the size of inventory increases that you expected and what's actually showing up.
01:23Some are calling it the missing barrels.
01:25What's happening there?
01:28So, what we're seeing already this year, for the first three-quarter of this year,
01:32the market was in surplus about two million barrels a day.
01:36And over that period, we did see global inventories increasing by about 300 million barrels.
01:42So, we are seeing the surplus manifesting itself in observed inventories.
01:47Of course, we don't have visibility on oil stocks in all parts of the world for all products.
01:52But what we are seeing is that during the first part of this year,
01:57significant stock buildings in Chinese crude storage.
02:00We also saw very significant increases in gas liquids holdings in the U.S. in particular.
02:07In the latest months, we're seeing a surge in oil on water.
02:11So, in September and October, about 160 million barrels a day of crude oil adding up to the water.
02:19So, this is on the basis of the record exports that we're seeing from the Middle East,
02:25but also from the U.S. and Brazil that are heading further afield markets in Asia.
02:30And also, as some of the oil from sanctioned countries, Russia and Iran are piling up on the waters.
02:39So, the data, sometimes there is lags in the reporting and the data,
02:43and we don't have full visibility on all the inventories.
02:45But what we're seeing in the market clearly underpins and confirms the view that we're seeing
02:52that the market today is relatively well supplied.
02:56And you mentioned sanctions.
02:58What do you think will be the market impact of U.S. sanctions on Russian oil giants like Luke Oil, like Rosneft,
03:05and the failure so far of Luke Oil to find a buyer for its international assets?
03:11The latest round on sanctions appear significant, and there's a clear risk to supply from these sanctions,
03:18not just for Russian supply, domestic supply, but also from some of the assets that these two countries have abroad.
03:28Luke Oil and Rosneft together produce about half of Russian oil production,
03:33and they market internationally about that same amount, 50%.
03:37We think it's too early to know the full impact of the sanctions as we see negotiations for asset disposal still ongoing in a number of countries,
03:48not just in upstream assets, but also in refining assets across Eastern Europe in particular, Bulgaria, Romania, other parts.
03:57And we're seeing some risk to upstream assets where Luko have majority shares, such as in Iraq.
04:04But with negotiations still ongoing for some of these assets,
04:11and what we've seen in the past when entities have been sanctioned,
04:15the industry's adapting quite quickly to new entities coming into the market.
04:20We're still looking to see how this would unfold, but we do note that there's significant risk to oil supplies at this time coming from the latest round of sanctions.
04:32The outcome would be dependent on enforcement this time around and also on the buyers,
04:38the choices of the buyers with regards to Russian supply.
04:43OK, we also have an OPIC Plus meeting coming on November the 30th.
04:47When you look into next year, do you expect the group to start cutting production?
04:53It's not for us to say what the OPEC secretary would decide.
04:57We know that they meet on a regular basis and they assess the market on a regular basis in detail as we do.
05:03And they have been nimble in adjusting their output targets in line with the market.
05:09Now they have put a pause in place for the first quarter of next year.
05:16And a lot would obviously depend on other market factors, such as the impact of sanctions on global supply,
05:23but also on the global economy and how demand will fare over this period.
05:29So, Torrell, we focus completely on supply. Let's go to demand.
05:33How do you reconcile these forecasts of a record oil glut with saying that demand growth is slowing and set to stop this decade?
05:42You've got the World Energy Outlook saying that demand may continue to grow to 2050.
05:47How do you put the two together?
05:48In our view, in our market report and in our medium term outlook that we published in June of this year,
05:57when we look for the forecast of 2030, we were seeing that the pace of growth is slowing in oil demand.
06:05And the data that we have coming in confirms the slowdown in oil demand growth.
06:12Already since in our report that we published in June that showed that oil demand plateaued towards the end of the decade,
06:21we did take into account some of the latest policy changes in the United States.
06:27And we increased our forecast for U.S. gasoline, for instance, based on the rollback of some of the more aggressive policies on EV adoption in the United States.
06:38But we're also making adjustments on the other side in China, for instance,
06:42where we see that the deployment of electrical vehicles is moving much faster than their stated targets.
06:49So in the data itself, we look at the data that come in.
06:52One of the main drivers or the biggest decline in oil demand over the medium term, in our view,
07:00was coming from the Middle East, where oil is being displaced in power generation by natural gas and renewables.
07:06And this is a trend that we're seeing moving actually faster than we had anticipated.
07:11So we see demand actually slowing down in some of those regions already this year.
07:18OK. Well, we're obviously seeing the oversupply narrative weighing on the Brent price this morning.
07:24$62 a barrel is where we trade, down three-tenths of a percent.
07:28Toril, always a pleasure to speak to you.
07:29Toril Bassoni, head of the oil industry and markets division over at the International Energy Agency.
07:35Toril Bassoni, head of the oil industry and markets division over at the International Energy Agency.
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