Speculators Flee Crude as Oversupply Drains Future Bets

1. Speculators Flee Crude as Oversupply Drains Future Bets

Oversupply is steadily becoming the buzzword for oil markets in 2026, with the IEA’s updated outlook for next year predicting a 3.3 million b/d market surplus if current policies remain in place. The International Energy Agency predicts that global oil supply will grow by 2.7 and 2.1 million b/d in 2025 and 2026, respectively, compared to a mere 700,000 b/d in global demand growth. OPEC does not forecast oil production of its own members, only publishing retrospective monthly output numbers based on direct communication and secondary sources.  Fears of oversupply have triggered an exodus of speculative investment away from crude markets, with net positioning held by hedge funds in WTI futures now the lowest in post-COVID years, at less than 20,000 contracts.US shale might become the primary target of oversupply-driven pricing downside, with Saudi Arabia pushing ahead with OPEC+ unwinding despite industry analysts’ gloomy outlooks.

2. Santos Blames ADNOC’s XRG as Landmark Takeover Unravels

One of the most closely followed potential M&A deals of 2025 has fallen apart after Abu Dhabi’s national oil company ADNOC dropped its $18.7 billion bid for Australian gas-focused producer Santos. According to media reports, the decision was due to disputes over the company’s valuation as well as questions regarding Santos’ gas fields in Papua New Guinea and capital gains tax liabilities arising therefrom. Santos shifted blame for the failed takeover on ADNOC’s investment arm XRG, saying the consortium would not agree to ‘acceptable terms which protected value for shareholders’.In its Q2 2025 report, Santos reported total quarterly production of 22.2 million boe, only a tenth of which was coming from crude, the equivalent of 20,000 b/d. If the transaction went through, it could’ve become the largest cash-only takeover in Australian history and the biggest worldwide in the energy sector. 

3. Gulf Fuel Stocks Slide as Fujairah Hits Historic Low

The Middle East is seeing a rapid rate of depleting inventories after refined product stockpiles held in the UAE’s main shipping hub of Fujairah fell to a record low this week. According to Platts data, total product stocks stood at 13.1 million barrels, down 16% since the beginning of this year and the lowest on record after fuel oil inventories continue to shrink.The fuel oil tightness was worsened by a recent diplomatic spat between the UAE and Sudan, seeing the former banning energy imports from the latter and depriving regional VLSFO bunkering of a valuable blending feedstock. Record fuel oil consumption in Saudi Arabia over the summer months has also contributed to tight stockpiles, with August imports of high-sulphur fuel oil rising to its highest monthly reading of 375,000 b/d.

4. China’s Crude Imports Surge Past Refinery Runs, Fuelling Inventory Jitters

Chinese crude oil imports are increasingly becoming a headache for oil markets as the country continues to take in more crude than its reported refinery runs, suggesting a widespread inventory-building spree by Beijing. Whilst data on Chinese stocks remains patchy, aggravated by the fact there’s underground SPR sites that largely go unaccounted by official statistics, however both Kayrros and Kpler indicate a 73-74 million barrel addition to the country’s inventories this year to date. China does not disclose data on domestic consumption; however, with refined product export quotas remaining flat year-on-year in 2025, in a stagnant demand situation, there isn’t much alternative egress for crude other than inventory. Another possible explanation is that market watchers have historically downplayed Chinese demand, with the IEA expecting only a 200,000 b/d increase this year. China’s NBS published official data for August this week, putting refinery runs at 14.94 million b/d last month, up 7.6% year-over-year. 

5. VLCC Freight Soars as Middle East Crude Floods Global Markets

Freight rates for Very Large Crude Carriers (VLCC), the largest ships available to transport crude oil across the seas, have soared to their highest since November 2022. The cost of shipping crude from the Middle East to China now stands at a whopping $6.6 million, a 150% jump since the start of the year, as Asian buyers import more OPEC+ barrels and take in more arbitrage volumes from the Atlantic Basin. Saudi Arabia’s national shipping company Bahri has warned of a tonnage shortage for VLCCs over the upcoming weeks, aggravated by the end of summer power burn in the country that sends more crude into export markets. Oil exports from the Middle East are expected to surpass 18 million b/d in September for the first time since April 2023, leading many to fear that the tanker squeeze is the first sign of 2026 oversupply. To move US crude to Asia, the daily freight rate has shot up to more than $80,000 per day (a voyage to South Korea takes on average 55 days). 

6. Asian LNG Prices Cool Off After Summer Conflict Spike

Ever since Asian LNG prices touched their summer peak of $14.8 per MMbtu at the peak of the Israel-Iran conflict, the continent’s liquefied gas prices have been on a steady declining path. The end of Japan’s heatwaves and high inventories across Northeast Asia have been adding to bearish sentiment in Asia, with JKM now pricing around $11.30 per MMBtu. Asian imports of LNG jumped last month to their highest since January 2024, at 25.7 million tonnes, buoyed by incremental volumes coming from Canada’s LNG Canada and Russia’s Arctic LNG. China, seeing this year’s LNG imports down 25% from a year ago, was the main force behind higher arrivals, nominating the highest Qatari volume in 2025 to date and buying record volumes of Omani LNG, a supplier it usually avoids.

7. Zinc Hits 2025 High as Chinese Producers Eye Export Windfall

Global zinc prices have risen to the highest in 2025, with LME three-month futures trading above $2,900 per metric tonne, tempting Chinese producers to export more of the metal abroad. The Chinese market is awash with zinc after August production rose to a 17-month high, just as demand started to show signs of weakness and ore imports jumped to their highest ever.On the other hand, Western inventories of the base metal are the lowest since November 2023 after nine consecutive months of drawdowns, with only 48,800 metric tonnes left in LME-registered warehouses. The widening spread between Shanghai and London futures could soon prompt an exodus of Chinese zinc into the markets, so far averaging only 1,200 metric tonnes per month this year.