Investors are ‘dramatically overestimating’ an oil glut, Carlyle’s Jeff Currie says

SINGAPORE — Global markets are severely overplaying an oil supply glut, said Jeff Currie, chief strategy officer of energy pathways at private equity giant Carlyle.

Concerns about a supply glut in the markets are “completely overplayed,” Currie said at the annual Asia Pacific Petroleum Conference in Singapore, attributing it to excessive pessimism about Chinese demand amid flat U.S. crude oil production.

U.S. crude prices hit their lowest last week since June 2023 as demand from the world’s largest crude importer stays tepid amid a perceivably oversupplied market.

“[China’s] weaknesses in demand are being deeply exaggerated by base effects and by destocking,” he said at APPEC. China’s crude oil imports in 2023 had notched a record high.

“There’s the transition component, which is moving trucks into LNG, and then there’s the economic weakness. So you’re down 500,000 barrels per day,” he said, adding that the worst of that transition is likely over.

China’s oil demand has been declining on the back of a slump in industrial inputs, according the International Energy Agency. Preliminary data from the agency is also pointing to an extended weakness in July, as China’s imports of crude oil dropped to their lowest level since 2022 during strict lockdowns in the country. China’s August crude oil imports fell 7%.

On the supply side, black oil production in the U.S., one of the world’s top crude oil producers, has been “flat” this year, Currie said. Black oils include crude oil, fuel oil, furnace oil, asphalt and tar. White oils include gasoline and kerosene.

“The U.S. is producing a record amount of natural gas liquids. Liquids are not oil … When you look at oil, U.S. production is flat this year,” said Currie.

“The key issue there is, the market is dramatically overestimating that flood [in oil supply], and it’s reflected in record short positions … and I’ve never seen anything like that,” he added.

In June, Carlyle said it would acquire a portfolio of gas-weighted assets with initial production estimated at 47,000 barrels of oil per day. The company struck a $945 million deal with Energean to acquire the latter’s assets in Egypt, Italy and Croatia, Reuters reported.

Other industry watchers disagree with Currie’s assessment on the issue of oversupply in the crude market.

“We probably are producing much more oil [on] the critical products than we are consuming, and that balance is seen to worsen for the next year,” said Torbjörn Törnqvist, CEO of commodities trading firm Gunvor.

Compounding oversupply concerns, oil group OPEC+ is expected to increase production in 2025 in a move that would mark its first increase in three years, said Jim Burkhard, head of research for oil markets, energy, and mobility at S&P Global.

Last week, members of the alliance postponed plans to hike production by a scheduled 180,000 barrels per day in October by two months. The move was supposed to be part of a program to return a broader 2.2 million barrels per day to the market over the following months.

Even if OPEC+ does not hike production, the world is still staring at over 5 million drills of unused oil today, Burkhard said. 

“Which means there’s going to be more unused capacity sitting there on the sidelines, and that is going to exert a downward pressure on prices,” he said.