Forecasts of Oversupply Clash with Geopolitical Oil Risks
Alex Hodes, StoneX Director of Energy Market Strategy, explores the shifting balance between geopolitical risks, trade changes and rising supply in oil markets.
Key Takeaways
Geopolitics and infrastructure attacks continue to sway oil markets
Forecasts point to oversupply risks into late 2025 and 2026
Diesel remains the tightest and most critical refined product
Geopolitics and Oil Prices
Hodes explained that while peace talks between Russia and Ukraine initially weighed on prices, the real driver has been attacks on Russian oil infrastructure. “What’s amplifying these moves lately has been the increase in attacks on oil infrastructure”. These risks continue to shape sentiment and price direction.
Shifting Trade Flows
India’s purchases of Russian oil have drawn new tariffs, but China has stepped in to absorb these flows. Hodes noted that such changes matter less for total supply and more for trade routes. “It shouldn’t have a large impact on the absolute global supply of oil”.
Forecasts of Oversupply
Looking ahead, the IEA and EIA both project a significant surplus. New barrels from OPEC, Brazil and Guyana are expected to add up to 2.5 million barrels per day by late 2025. Hodes cautioned that this oversupply could weigh on prices, though geopolitical risks could quickly alter the picture.
Diesel in Focus
Despite forecasts of abundant crude, refined products remain tight, especially diesel. “Diesel is really the driver of the industrial space as well as transportation of goods”. Attacks on refineries are already pushing diesel and gasoline prices higher, making this segment the most critical for businesses and investors to watch.
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