Oil has hit its lowest point in eight months, and operators fear a lasting imbalance in the market. Do you share this view? What are the consequences?

Markets, including oil markets, are very short-term focused. The term "lasting" should be understood in this context. Let’s say this concern applies to the 2024-2025 period. Behind this fear lie tangible factors, particularly regarding supply, and anticipations, particularly regarding demand. Overall, there is a significant likelihood of a supply surplus over demand in 2025. That said, global oil demand continues to rise in 2024 after reaching a record level in 2023, and the same will be true in 2025. The main consequence of this situation and perception is the drop in crude oil prices. Using Brent as a reference, prices have fallen by $14 since early July, with nearly $86 per barrel on July 3 and $71.80/b on the evening of September 9.

What are the reasons? Is crude oil supply too high on the market while economic slowdowns hit the United States and China?

Despite production cuts by OPEC+ countries (22 nations), global oil supply will continue to rise by the end of 2025 due to the production growth in four American countries: the United States and Canada in North America, and Guyana and Brazil in South America. This is a well-established point. Meanwhile, concerns are rising over China’s economy. This country is the second-largest global oil consumer after the United States and the largest importer. Additionally, it was expected to be the main driver of demand growth, accounting for just under 40% of the 2024-2025 period.

Expert Sam Stovall believes the geopolitical premium that crude prices have benefited from since the beginning of the war between Israel and Hamas "has masked weak demand." More generally, do geopolitical factors affect crude oil prices?

Oil is a commodity with a very strong geopolitical dimension, so it is perfectly logical that geopolitical tensions have a significant, even major, impact on oil prices. In 2022, the war in Ukraine had a very bullish effect on crude oil prices. Regarding the Gaza war, there has been a geopolitical premium in oil prices several times since October 2023, but it has been much smaller than the one related to the Ukraine war. Returning to Sam Stovall’s statement, he is absolutely right: if the Gaza war ended tomorrow, oil prices would drop. Yet, Israel and Gaza do not produce a drop of oil. But the war is in the Middle East, a region that holds nearly 50% of the world's proven crude oil reserves. Markets fear the regional spread of this conflict, which could disrupt oil activities. We are already seeing signs of this with daily clashes between Israel and Hezbollah in Lebanon, Houthi attacks from Yemen on merchant ships in the Red Sea, including oil tankers, and the risk of direct conflict between Israel and Iran. Despite these threats, Middle Eastern oil production and exports have not, so far, been negatively impacted by the Israel-Hamas conflict, which has led to a decrease in the risk premium, and markets are now more concerned about the evolution of global demand. But this geopolitical premium could rise again tomorrow, depending on how the situation evolves.

The Organization of Petroleum Exporting Countries is discussing a possible postponement of its planned production increase… Is this just empty talk?

Eight OPEC+ countries had decided to increase their oil production by 180,000 barrels per day each month from October 2024 to September 2025, totaling 2.2 million b/d over this 12-month period. On September 5, these countries (Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman) announced they were delaying the implementation of this decision by two months, meaning that the gradual production increase will start in December 2024, not October. These states hoped to reassure the oil markets, but this postponement had no bullish impact because two months is not much. It wasn’t enough to impress operators. OPEC+ will need to come up with something else if it really wants to push prices back up.

Could the current weakness in oil prices be a lifeline for the French and German economies?

The drop in oil prices benefits all crude oil-importing countries, including EU member states. Germany and France produce little or no oil, so their consumption is largely met by imports. It’s good news for these two countries, but only a small piece of good news because we must not forget that oil prices could rise again tomorrow or the day after. And it won’t compensate for the structural weaknesses in the economies of these two nations.