Oil extends losses on US inventory build, OPEC forecast shift

Oil prices edged lower on Thursday, extending significant losses from the prior session (Brent -3.8%, WTI -4.2%), as Brent crude traded at $62.62 and WTI at $58.38. This continued decline was primarily fueled by a reported 1.3 million barrel increase in U.S. crude inventories and a revised outlook from OPEC, which now projects a global oil supply surplus in 2026, contradicting earlier deficit forecasts. Further bearish pressure came from the EIA's expectation of record U.S. oil production and growing global inventories through 2026, reinforcing market concerns about oversupply despite some analyst views that the reaction may be overdone.

Analysis

Oil prices experienced a significant decline, with Brent crude falling 0.1% to $62.62 and WTI down 0.2% to $58.38 on Thursday, extending Wednesday's substantial losses of 3.8% and 4.2% respectively. This bearish sentiment was primarily driven by a reported 1.3 million barrel increase in U.S. crude stockpiles for the week ending November 7, according to API figures, reinforcing concerns about ample global supply.

Further pressure stemmed from OPEC's revised outlook, which now projects a global oil supply surplus in 2026, a notable shift from its previous deficit forecasts. This revision, attributed to wider production increases by OPEC+, contributed to a more than $2 per barrel drop on Wednesday and aligns with the U.S. Energy Information Administration's (EIA) expectation of record U.S. oil production and growing global inventories through 2026.

DBS Bank's Suvro Sarkar noted that while OPEC's acknowledgment of a potential 2026 supply glut is a more realistic market reading, the immediate market reaction might be overdone given unchanged fundamentals. However, Haitong Securities' Yang An highlighted that OPEC's signal combined with the U.S. inventory build unleashed previously pent-up bearish sentiment. Despite the bearish outlook, some analysts, including Sarkar, anticipate considerable price support around $60/bbl, particularly due to potential short-term disruptions to Russian export flows from stricter sanctions.

Key Decisions for Investors

• Investors should closely monitor the official EIA inventory data for confirmation of the API's reported U.S. crude build and its implications for short-term supply dynamics.
• Re-evaluate long-term oil exposure and investment theses in light of OPEC's revised 2026 supply surplus projection and the EIA's forecast for sustained global inventory growth.
• Consider the potential for price support around the $60/bbl level, factoring in geopolitical risks such as stricter sanctions on Russian oil exports that could introduce short-term supply disruptions.