OPEC lowers global oil demand forecast, Q3 shifts from "undersupply" to "oversupply," oil prices plunge 4%.

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In its latest monthly report released on Wednesday, OPEC stated that due to US production exceeding expectations, along with increased supply from the organization itself, OPEC has revised its outlook for the global oil market in the third quarter from a supply shortage to an oversupply.

The report indicates that in the third quarter of this year, global oil supply exceeded demand by 500,000 barrels per day; whereas a month ago, the estimate was a daily shortage of 400,000 barrels. The OPEC Secretariat has raised its estimate for supply from countries outside OPEC and its allies this quarter by 890,000 barrels per day, with slightly more than half of the increase coming from the United States.

The report also shows that OPEC+ alliance's crude oil production last quarter has already surpassed the level needed for market equilibrium. In October, OPEC's overall crude oil output only increased by 33,000 barrels per day to reach 28.46 million barrels per day, with most of the increase coming from Saudi Arabia, Iraq, and Kuwait. Total output from OPEC+ member countries dropped by 73,000 barrels per day to 43.02 million barrels per day.

However, key member countries have shown signs of slowing down their strategy for the first time this month, agreeing to pause further production increases in the first quarter of 2026—marking the alliance's first pause in output growth. As a cautious signal, Saudi Arabia, the world's largest oil exporter, has significantly cut December crude prices for Asian customers. OPEC says this adjustment is due to seasonal demand decline, but many analysts warn that a significant supply surplus may appear in the global market.

Market observers note that of the production increases pledged by OPEC+, only about half are expected to actually reach the market, as some member states still need to compensate for previous overproduction, while others face capacity constraints. Kazakhstan, whose overproduction has repeatedly caused internal tensions within the group, saw its crude oil output fall by 155,000 barrels per day in October to 1.71 million barrels per day.

Oil Prices Plunge

As a result, Brent crude futures fell by 3.82% intraday on Wednesday, trading at $62.37 per barrel; US West Texas Intermediate (WTI) dropped $2.58, a decline of 4.23%, to $58.41 per barrel. In the previous trading day, both had risen by 1.7% and 1.5%, respectively.

OPEC has raised its estimate of US total liquid fuel production in the third quarter from 22.27 million barrels per day last month to 22.81 million barrels per day. However, due to downward revisions in other quarters, the increase for non-OPEC+ countries' overall supply in 2025 is much smaller, only 110,000 barrels per day.

Meanwhile, the International Energy Agency (IEA) predicted in its World Energy Outlook released Wednesday that global oil and gas demand may continue to grow until 2050. This marks a significant shift from its earlier forecast that demand would peak this decade. The IEA has moved from predictions based on national climate commitments to an evaluation model based solely on current policies.

Phil Flynn, Senior Analyst at Price Futures Group, told the media,

“The outlook for a balanced market is undoubtedly the main reason for the depressed oil prices. I think the market wants to believe supply and demand are reaching equilibrium, and prefers to trust OPEC's judgment rather than the IEA's.”

Oversupply May Continue Next Year

Looking ahead to 2026, OPEC data does show the market will be in oversupply, but the scale is more moderate than other agencies' predictions. To keep the global market balanced, OPEC+ would need to produce 42.6 million barrels per day in the first quarter of next year, while actual output in October already reached 43 million barrels per day.

OPEC points out that as oil demand in non-OECD countries is expected to keep growing in the coming years, expanding storage capacity will be key to securing supply. As of the end of September, non-OECD countries’ oil inventories could only cover 50 days of consumption, compared to 88 days for OECD countries.

Additionally, the OPEC Secretariat welcomed the IEA's latest stance earlier on Wednesday. OPEC said that after years of forecasting peak oil consumption this decade, the IEA has “finally aligned with reality.”

Currently, the eight OPEC+ member states participating in production cuts and increases, along with the 22-country alliance as a whole, will meet on November 30 to discuss the next steps in policy.

US Government Reopening May Support Oil Demand

On the other hand, some analysts believe that the reopening of the US federal government may boost consumer confidence and economic activity, thereby increasing oil demand.

Tony Sycamore, an analyst at IG Market, wrote in a report that the US House of Representatives (controlled by Republicans) is expected to vote Wednesday evening on a bill already passed by the Senate that would fund government agencies through January 30 of next year.

The US Energy Information Administration (EIA) is expected to release its latest energy outlook report on Thursday.

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