This is the first time in a decade since I’ve specialized in energy that none of the energy specialists are in disagreement.
First time.
This point is important to understand when analyzing the oil market because in a normal market environment, oil prices are sensitive to small changes to the balance. If you have been building oil supply & demand models as long as I have, you might get disagreements between 0.5 to 1 million b/d at most.
Coming into 2026, IEA had projected a surplus of 4 million b/d, while others projected a surplus of 2 million b/d. This was considered the largest difference in forecasting ever.
Think about that for a second. It’s 2 million b/d; how much can you really argue about here?
A lot, actually. And this is where the generalists just have no idea when it comes to the oil market.
You see, commercial inventories are not really all commercially available. US commercial crude storage has a headline number of 460 million bbls, but it’s not really 460 million bbls. Roughly 135 to 155 million bbls of that is in linefill, volumes needed to keep pipelines flowing. And then you have operational minimums, volumes required to keep storage working.
The reality is that US commercial crude storage has a tank bottom near 370-380 million bbls and has a tank capacity of 540 to 570 million bbls. The margin of 160 to 200 million bbls is all you can play with.
So when you talk about a 2 million b/d surplus, that’s a lot. Over 365 days, that’s a build of 730 million bbls. Without buying from China, this type of surplus can easily push commercial crude storage towards tank tops. This is why during the COVID lockdown, oil prices responded so swiftly to the downside. A 15 million b/d demand outage, coupled with the Saudis launching an oil price war, all but guaranteed that other producers had to shut-in production to prevent storage from hitting max.
And this brings me to the point of this article: none of the energy specialists disagree on the “math” because the deficit is so large; the minuscule details we used to argue over are no longer relevant.
If you miss the current balance by as much as 2 million b/d, you are really not missing all that much. When global oil production shut-in is as high as 13 million b/d, whether it’s 9, 10, or 15 million b/d becomes irrelevant.
Oil market balances are extremely sensitive to imbalances of just 1 million b/d, let alone a supply outage of 12 million b/d. You have to be in the oil market to understand that, and very few generalists appreciate this fact.
So it’s not fear-mongering when everyone in energy is screaming at the top of their lungs that there’s a crisis coming. Because it is what it is.
Heavyweights Agree
There are 3 independent heavyweights in the physical oil trading business: Shell, Vitol, and Trafigura. Combined, the 3 heavyweights trade ~27 to ~28 million barrels per day. In global oil supply terms, they are ~26% of the market.
So when the math of 1 billion bbl supply loss gets validated by both Vitol and Trafigura, you can imagine the smile on my face.
Vitol
Trafigura
And once again, this brings me to my point: there’s never been a point in my career when everyone specializing in energy agrees on the magnitude, while the market disagrees.
This is the first.