Global Commodities: Risk premium out, storage premium in
whatshot 5 snips
Sep 5, 2025
The podcast dives into the recent dynamics of global oil supply and demand, particularly how non-OECD production and China's stockpiling affect pricing strategies. It highlights the current build in global inventories, with China contributing significantly. The discussion also addresses geopolitical challenges, analyzing how U.S. sanctions influence oil demand and price stability. With a notable storage premium in play, experts examine China's refining capabilities and future forecasts amidst uncertainties in the oil market.
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insights INSIGHT
August Tightness Despite Supply Expectations
Brent held tight in August despite expectations of supply-driven weakness, signaling persistent physical tightness.
Demand remains healthy and world oil consumption is still expected to grow about 800 kbpd in 2025.
insights INSIGHT
U.S. Policy Drives Price Volatility
U.S. policymaking volatility has driven recent oil price swings more than geopolitics.
Tariff concerns shaved about 10% off crude prices this year despite demand resilience.
insights INSIGHT
Sanctions Have Muted Price Impact
Recent sanctions and tariff moves add tail risks but haven't produced expected price spikes.
Buyers and suppliers are finding ways to navigate restrictions, muting sanction impact.
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Oil prices have been trading at a premium to fair value over the last two months with Brent’s outperformance driven not by geopolitical factors but rather by an lopsided build in global inventories, with China accounting for two-thirds of the increase. While OECD inventories remain the primary driver in our pricing model, only 25% of this year’s global stock build has entered OECD storage, compared to the historical average of 40%, creating a valuation challenge. Mathematically, lower OECD intake raises Brent’s fair value, even as global stocks build, resulting in a storage premium. Looking ahead to 2H25, the key questions are how much spare storage capacity China has—currently about 600 million barrels—and whether China will use excess crude to ramp up processing and export more refined products. For now, stock builds are likely to continue outside price-setting Western markets, and despite higher refinery runs, Chinese product exports remain below last year’s levels as domestic inventories are replenished. Still, given the market’s move toward a sizable surplus and ongoing uncertainty around both the scale and drivers of China’s stock build, we are maintaining our current price forecasts.
Speaker:
Natasha Kaneva, Head of Global Commodities Research
At Any Rate