Bloomberg’s Javier Blas warned on Monday that the next oil glut will be harder and costlier to finance than any in recent memory, describing a “cartoonish” surplus forming as new barrels from Guyana, Brazil, the United States and the Middle East converge with slower demand growth and sharply higher borrowing costs.
In a column for EnergyNow, Blas argues that the most dangerous element of the coming oversupply is not the scale of production but the price of money.
In previous downturns, cheap credit allowed traders to hold crude in storage and profit from contango, Blas says. Now, with financing rates above 6%, the cost of carrying inventories could erase margins entirely. That shift, Blas says, may cripple smaller refiners and traders reliant on short-term loans, leaving state-backed producers such as Saudi Aramco, ADNOC and Petrobras in a stronger position to weather prolonged weakness. The result could be a market overflowing with oil but thin on liquidity.
Standard Chartered’s latest analysis provides a counterweight. The bank believes Iraq’s compensation cuts of 130,000 barrels per day through January 2026, easing to 122,000 bpd by mid-year will offset most of OPEC+’s 137,000-bpd October production increase. Kazakhstan’s back-loaded schedule, rising from 35,000 bpd in December to 650,000 bpd by June 2026, adds further flexibility. Together, those adjustments could neutralize the group’s output growth and steady prices, according to the bank’s latest review.
Additional data from FGE show the United States remains the swing factor in the global balance. National output reached 13.58 million barrels per day in June, a new record, with growth concentrated among major producers even as smaller independents retrench. FGE projects U.S. production peaking near 14.34 million bpd by March 2026, while global output rises to 110.4 million bpd.
The oil bulls and bears are facing off aggressively now, with Standard Chartered and FGE emphasizing a disciplined OPEC+ policy and U.S. growth stabilizers to make the bull case, while Blas is warning of a financing shock that could choke storage and trade. Goldman Sachs aligns with Blas, predicting that oil markets could be oversupplied by 1.9 million bpd in 2026. In the meantime, more and more Wall Street punters are of the same mind, predicting oil in the $50 range next year.
Against this backdrop, OPEC+’s Sunday announcement of a modest output hike plays to the bull’s idea of a disciplined cartel, with oil prices reversing earlier losses. By 2:24 p.m. ET, Brent crude was trading at $65.46, up 1.44%, and WTI trading at $61.69, up 1.33%.
By Charles Kennedy for Oilprice.com
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