Publications: Notes at the Margin

A Superglut? Maybe Not (December 15, 2025)

 

Last week, a barrel watcher with little or no economic expertise warned of a “superglut” in oil markets. In this individual’s view, projected increases in global crude inventories could put significant downward pressure on prices. Other watchers concurred, observing that stock levels are rising toward record highs.

 

The barrel watcher in question, along with many who follow global oil supply and demand, seems to be ignoring changing circumstances. The current data derived from the oil market—information apparently beyond the ken of most forecasters—affirm that buyers are remaining cautious. We also note that relying on historical data for precedents is unreliable in many cases because substantial oil volumes have been shifted to China from the rest of the world.

 

The present market conditions resemble those prevailing in 1986 and 2014. On both previous occasions, prices did not deteriorate until Saudi Arabia abandoned OPEC and opened the taps. Prices today are unlikely to drop sharply absent such a step, particularly if China continues to add to its holdings.

 

To get a more accurate picture of the market, followers would be wise to pay less attention to barrel counts and more to price-based indicators.

 

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