Oil Glut on the Horizon? 

Investment Cuts and Cost-Saving Measures

• The largest oil and gas companies are turning down a notch with reductions in investments, jobs, and billions of dollars in additional cost saving programs. Companies like Chevron and BP have cut their spending plans, with projects being put on hold or sold to balance the books.
• This is a pattern also being observed in state-run energy companies, with Saudi Aramco selling a $10 billion stake in a pipeline network and Petronas of Malaysia cutting 5,000 jobs from its workforce.

Weak Demand and Market Outlook

• These decisions come as supply-demand dynamics are pointing to lower oil prices in the coming months. Oil demand remains soft, and markets may be underestimating final tariff levels on US imports. J.P. Morgan Analysts are now projecting oil demand to expand by 800 kbd (thousand barrels per day) in 2025, down 300 kbd from its previous forecast.

OPEC Strategy & Oil Glut Concerns

• The oil cartel OPEC has, over the past five months, pivoted from a strategy of restraining production and propping up prices to regaining market share and outcompeting higher-cost rivals in the US and other non-OPEC nations.
• The International Energy Agency (IEA) says global demand in 2025 will grow by less than 700,000 barrels per day (bpd), while supply is set to rise by 2.5 million bpd, leaving a surplus of more than 1.8 million bpd, which increases concerns of an “oil glut.”
• An “Oil glut” is when the supply of oil on the market exceeds the demand significantly, sparking an oversupply that can lead to lower prices and heavy inventory levels.
• The imbalance is likely to push prices down, with the US Energy Information Administration (EIA) forecasting Brent crude to average just $51 in 2026.
• The effect will be worse for sanctioned countries like Iran, Russia and Venezuela, pushing them to offer discounts on exports.

Operational Changes and Technology Adoption

• Major oil companies are also undergoing operational changes, such as outsourcing and adopting new technology, with administrative, accounting, and skilled engineering work being relocated to countries like India and Bangladesh.
• In addition, investments in artificial intelligence are allowing more to be done with less, big oil companies are also leveraging outsourcing and new technologies, with administrative, accounting, and skilled engineering jobs shifting to countries such as India, and artificial intelligence offering opportunities to do more with less. “AI is giving operators new ways to optimise in a challenging market,” said Andrew Gillick at Enverus, with “more to come”.

Bottom line

• At Cordoba, we are closely monitoring oil markets, and our forecasts indicate a potential glut that could lead to lower prices in 2026. This outlook hinges on OPEC+ adhering to its planned production increases despite sluggish global demand growth. However, it remains too early to say with certainty, given the possibility of geopolitical disruptions in Russia-Ukraine and the Middle East, as well as the accelerating transition towards renewable energy