Asian refineries are looking for crude oil from regions beyond their typical suppliers in the Middle East, but this broader approach is not impacting a market that is bracing for an oversupply.
The area, which uses approximately 40% of global oil, typically relies heavily on oil barrels from the Persian Gulf. However, President Donald Trump’s shifting trade and foreign policy tactics, such as redirecting Russian oil flows, led to American shipments being redirected to Brazil and Nigeria.
The surge in buying of light crude oil with low sulfur content, which significantly influences Brent prices, was expected to bolster the global benchmark and narrow spreads between teams, key market health indicators. However, this did not occur.
Brent’s award to Dubai, the Middle East’s crude reference oil, dropped to its lowest point since April as traders anticipate an abundance of oil in the market in the near future, including more barrels from sources both inside and outside the OPEC+ alliance.
“We are nearing an oversupply situation,” stated Gary Ross, an experienced oil consultant turned hedge fund manager at Black Gold Investors LLC. “There has been ongoing discussion about this for a while now, with many anticipating negative balances in the fourth quarter, leading us closer to a critical point.”
The projected surplus for the upcoming quarter is largely a result of OPEC+ replenishing many of the barrels stored during the Covid-19 outbreak and the increased output from non-OPEC+ producers like the USA, Brazil, and Guyana.
OilX, a division of Energy Aspects consultancy, reports that the average global production so far this year is 1.4 million barrels per day, which exceeds the level recorded at this point in 2025. This figure is more than twice the International Energy Agency’s (IEA) latest forecast for the entire year’s demand growth.
“The last quarter of this year and the initial quarter of the following year appear to be notably lacking in strength,” stated Aldo Spanjer, who serves as the chief energy strategist at BNP Paribas SA.
Trump’s forceful foreign and trade strategies are altering the direction of flows and causing significant uncertainty and instability.
Indian refineries released approximately 20 million barrels of oil onto the market this month, as per Bloomberg’s estimates, bypassing Russian supply. It remains uncertain if this recent purchase from Russia will continue.
Trump’s efforts to decrease countries’ trade surpluses with the US seem to be having an effect, as seen with a Pakistan refinery purchasing its first US oil shipment and a Japanese company buying American oil in response to tariff pressure.
The tight Brent-Dubai spread is enabling US and West Africa crude oil to reach Asia at competitive prices, according to June Goh, a senior oil market analyst at Sparta Commodities. WTI, especially, is being offered at discounted rates in Asia, creating opportunities in new markets like Pakistan and Vietnam.
Oil costs
The rise in the request for American oil led to higher prices on the US Gulf Coast for exported barrels, but did not have a significant impact on supporting local benchmarks across the country.
The time spreads for West Texas Intermediate are near their lowest point since May, as inventories at the storage facility in Cushing, Oklahoma, have risen for seven weeks in a row.
The market is dealing with an unclear and gloomy demand outlook due to uncertainties surrounding the impact of Trump’s tariffs on global economic growth and the ongoing shift away from fossil fuels, particularly in China. According to the IAEA, global oil demand growth for this year and the next is expected to be less than half of what was observed in 2023.
In Europe, there has been a consistent shutdown of plants, including two out of the six refineries in the UK, which is expected to lead to a decline in crude oil processing this year. Additionally, upcoming refinery maintenance in the USA and Europe is also anticipated to negatively impact refinery demand.
Banks with a negative outlook
Main banks are mostly negative about oil, with Goldman Sachs forecasting a slight decline in Brent prices to around $60 by the year’s end. However, current indicators hint that prices might decrease more than anticipated.
Spanjer from BNP Paribas expressed that the market is anticipating the opportune time for Brent and WTI. He mentioned that the supply growth is expected to decrease in the latter part of 2026, leading to improvements thereafter.
