Growing Oversupply in the Global Oil Market

Ben Graham · Novembro 21

Global oil markets are showing a rapidly growing supply surplus.
“Oil on water” volumes have surged, signaling difficulties in placing cargoes.
Sanctioned oil flows increasingly contribute to the buildup in floating storage.
New sanctions on Russia may intensify oversupply pressures in the coming weeks.

A clear supply-side pressure is emerging in the global oil market, a trend that agencies such as the EIA and IEA have been signaling since the start of the year but which had not been fully visible in official statistics. The main reason was China accumulating crude oil outside the OECD reporting system. This situation, however, is now beginning to shift. Data from recent months show a marked increase in the volume of oil in maritime transport, an early indicator of an emerging imbalance between supply and demand.

Although OECD inventories remain below their five-year average, the “oil on water” indicator is rising rapidly. According to the latest IEA report, the volume of crude held on tankers rose by 80 million barrels in September and by an additional 92 million barrels in preliminary October data. Vortexa figures confirm the scale of this increase.

This level of accumulation at sea typically indicates that supply is starting to exceed current demand, and producers are finding it increasingly difficult to place their crude on end-markets. Oil “circulating” in transit is often the first sign of an impending surplus in the physical market.

Chart of a CFD contract based on the price of Brent crude oil, daily data, source: Tradingview

The Role of Sanctioned Oil Flows

A significant element of this dynamic is the contribution of sanctioned oil, which—according to the IEA—accounted for roughly one-third of the increase in the past two months. Crude subject to trade restrictions more frequently faces delivery delays, payment issues, and limited access to insurance and port infrastructure. As a result, tankers spend longer periods at sea, boosting total oil-on-water volumes.

Upcoming Russian Sanctions Likely to Intensify the Trend

Supply pressures may increase further with the 21 November sanctions taking effect on the two largest Russian oil companies, responsible for half of Russia’s total production and exports. If these sanctions restrict their ability to sell crude, the global market may face an even larger wave of “stranded” cargoes, reinforcing the upward trend in oil volumes held in transport.

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