The data is unambiguous. For months, anyone with access to a Bloomberg terminal and a basic understanding of supply-and-demand has seen this coming. It’s been discussed in hushed tones on trading floors and spelled out in the dry, clinical language of analyst reports discussing The Coming Oil Glut. The global oil market is shifting from years of deficits into a significant, structural surplus. A glut.
Yet, the market’s reaction feels strangely muted. There’s no panic, no capitulation. Just a slow, grinding decline in `crude oil prices`. West Texas Intermediate (WTI) is now fetching less than $60 a barrel, a far cry from the $100-plus levels of 2022. This isn’t a shock; it’s a slow-motion inevitability. So the real question isn’t if the glut is here, but why the market is treating it like a distant weather forecast instead of a storm already making landfall. The answer, my analysis suggests, is that the market is being temporarily blinded by a handful of potent, but ultimately fleeting, distortions.
At its core, the situation is a textbook case of market imbalance. On one side, you have a surge in supply. This isn't coming from just one place. It’s a broad-based increase, with strong non-OPEC growth from the U.S., Canada, Brazil, and Guyana creating a high floor for global production. On top of that, you have the seismic shift from OPEC+. The cartel, along with its allies like Russia, has decided to rapidly unwind years of production cuts, unleashing millions of barrels back onto the market.
The official reason for accelerating the return of 2.5 million barrels per day was a sort of rip-off-the-Band-Aid mentality. But what was the real catalyst for such a dramatic reversal? Was it simply a surrender to the reality that members like Kazakhstan and Iraq were cheating on their quotas anyway, making the cuts porous and ineffective? Or was it a strategic pivot to reclaim market share, even at the cost of lower prices? The details remain debated, but the effect is the same: more oil. A lot more.
On the other side of the ledger, demand growth has slowed to a crawl. The primary engine of global demand for the last decade—China—is sputtering. The country that accounted for over 60% of demand growth between 2013 and 2023 is now wrestling with a structural economic shift and a massive push into electric vehicles. The result is a demand profile that looks less like a rocket ship and more like a plateau.
When production is growing far faster than consumption, the outcome is preordained. The surplus flows into storage tanks, inventories swell, and downward pressure on `oil prices` becomes immense. We are already seeing this. To correct the imbalance, the price must fall to a level that either chokes off supply or stimulates new demand. Given the sluggish global economy, choking off supply is the far more likely path.
If the math is so clear, why isn't WTI at $45? Because two major forces are currently obscuring this reality. The first is the contradictory policy of the Trump administration. The campaign rhetoric was "drill, baby, drill," but the political reality is that American presidents live and die by `gas prices` (a well-documented negative correlation with approval ratings). President Trump has openly celebrated crude’s fall below $60, taking credit for lower prices at the pump. He has effectively talked down the very industry he vowed to unleash, creating a confusing signal for American producers.
This isn’t just talk. The administration’s reluctance to aggressively clamp down on Iranian or Russian oil exports has contributed to the supply glut. It’s a classic case of a president’s political incentives running directly counter to the economic interests of a major domestic industry.
The second, and more immediate, distortion is China. In a move driven by acute energy insecurity, Beijing has been on a strategic stockpiling binge, vacuuming up nearly a million barrels per day of excess crude through the second quarter of 2025. This has put a temporary floor under `oil prices today`, making the surplus appear smaller than it actually is.
This is the part of the data I find most telling. I've tracked sovereign inventory builds for over a decade, and they are always a temporary phenomenon. Beijing's stockpiling is acting like a giant sponge, soaking up the excess crude and keeping the floor from getting wet. But a sponge has a saturation point. Once it's full—and it will be—the flood is just a flood. This isn't a solution to the surplus; it's a postponement of its full impact.
Meanwhile, the consequences are already hitting the U.S. shale patch. The Dallas Fed estimates the average breakeven price for a new well is in the low $60s. With prices below that, projects are being scrapped. Oil drilling rig counts have fallen precipitously since April. We haven’t seen the full impact on output yet because of the months-long lag between investment and production—a phenomenon consultant Ed Crooks aptly calls "coyote time," where the industry runs on air for a moment before gravity takes hold. But gravity is undefeated. A contraction in U.S. production isn't a risk; it's a mathematical certainty at these prices.
Let's be perfectly clear. The market is not avoiding a correction; it is merely delaying the recognition of it. The forces keeping `crude oil prices` from collapsing further—political inertia and China's finite storage capacity—are temporary. The underlying fundamentals of a massive supply surplus are not.
The coming pain for producers, particularly in the U.S. shale fields, is a necessary, if brutal, part of the rebalancing process. The artificially tight market of 2023-2024, propped up by OPEC+ cuts, is over. What replaces it will be a period of price discovery to find a new equilibrium. That equilibrium will almost certainly be at a lower price point than we have today.
The only real questions are how long China can continue its buying spree and how quickly U.S. producers will be forced to shut down drilling rigs. But make no mistake, the "most anticipated oil glut" is here, and the market will eventually be forced to price it accordingly. The numbers don't lie.
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