Crude Oil Falls on Bearish Weekly Inventory Report and IEA Oil Surplus Forecast

September WTI crude oil (CLU25) on Wednesday closed down -0.52 (-0.82%), and September RBOB gasoline (RBU25) closed down -0.0040 (-0.19%).

Crude oil prices on Wednesday fell due to a bearish weekly EIA crude inventory report of +3.0 million bbls and a bearish oil surplus forecast by the International Energy Agency.

The International Energy Agency (IEA) on Wednesday released a report forecasting a record global oil surplus of 2.96 million bpd in 2026 due to tepid demand and increased supply.  Wednesday’s IEA report added to the gloom about an emerging global oil surplus.  For its part, the US EIA on Tuesday raised its forecast for the 2025 global oil surplus to 1.7 million bpd from 1.1 million bpd.  The EIA expects a global oil surplus of 1.5 million bpd in 2026, up from its previous forecast of 1.1 million bpd.

Oil prices Wednesday were also on the defensive due to the possibility of progress at the Trump-Putin summit in Alaska on Friday regarding the Russia-Ukraine war.  President Trump recently said that he would impose new tariffs on countries buying Russian energy unless Russia reaches a ceasefire with Ukraine.  In fact, President Trump last Wednesday doubled tariffs on US imports from India to 50% from 25% because of India’s purchases of Russian crude.  However, Mr. Trump might not impose tougher sanctions or tariffs regarding Russian oil, and might even relax current sanctions, if he is pleased by Mr. Putin’s comments at Friday’s summit.

In a bullish longer-term factor, the EIA on Tuesday forecasted that US oil production in 2026 will fall to 13.28 million bpd, which would be the first annual drop since 2021.  US shale companies are reducing their drilling and production plans due to low crude oil prices.  The number of active US oil rigs recently fell to a 3.75-year low of 410 rigs.

Concern about higher OPEC production is weighing on crude prices after OPEC+ on August 2 endorsed an additional 547,000 bpd increase in its crude production for September 1.  OPEC+ is boosting output to reverse the 2-year-long production cut, gradually restoring a total of 2.2 million bpd of production by September 2026.  OPEC+ has 1.66 million bpd of supplies that are currently due to remain offline until late 2026.  OPEC July crude production fell -20,000 bpd to 28.31 million bpd.