The immediate triggers are clear. The resumption of Kurdish
crude exports has added barrels back to an already saturated market. OPEC Plus,
once a disciplined enforcer of scarcity, is instead edging up production to
defend market share. Add to this the steady increase in US output, and the
result is an unmistakable surplus. In Washington, reports of rising crude
stockpiles reinforce the perception that inventories will keep swelling into
2026.
Demand is hardly roaring either. The end of the US summer
driving season has clipped consumption, while China—the world’s most important
incremental buyer—remains stuck in an uneven recovery. India, though growing
fast, cannot absorb the excess.
Analysts now project that inventories will rise by more than
two million barrels per day through early next year. In oil economics, that is
the equivalent of a slow-motion glut.
Layered on top is the dollar’s strength. Every tick upward
in the greenback makes oil more expensive for non-US buyers, further cooling
appetite. And unlike past cycles, geopolitical flashpoints—sanctions on Iran,
Russia’s war economy, Middle East tension—have not translated into major supply
disruptions. Traders, ever cynical, now discount the “risk premium” that once
propped up prices.
The real story is structural. Oil is losing its tightrope
balance between scarcity and abundance. Producers are pumping more
aggressively, while demand faces limits from efficiency gains and a global
economy weighed down by debt and weak growth.
Unless OPEC Plus suddenly reverses course or a geopolitical
shock knocks supply offline, the path of least resistance for oil is downward.
For consumers, cheaper fuel may feel like relief. For
producers, especially those whose budgets depend on oil, it is a creeping
crisis. And for the global system, it is a reminder the age of automatic oil
windfalls is over, and volatility is the new name of the game.
