Global Oil Supply Will Keep Growing, Goldman Says

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00:00Crude continuing to fall. A real question here with the oversupply. Under surveillance this

00:04morning, earnings from the oil giants crossing this hour. Exxon shares are lower with the plans

00:09for major expansion projects. Chevron rising after posting strong results. Joining us now,

00:14Goldman Sachs' head of oil research, Dan Struyven. Dan, thank you so much for being here. What a year

00:19on all the commodity fronts. I'm just wondering with the oil giants, what this tells you

00:23about the path of production in the months and years to come.

00:26Yeah, so I think those earnings help us to check in on the key assumption that global

00:32supply will continue to grow. We estimate that actually in the fourth quarter of this year

00:39on a year-over-year basis, global oil production will be up 4%. That's four times more than

00:43in a normal year. And that, in combination with the global stocks data that are rising, supports

00:50our view that you sort of have another $10 per barrel of downside for oil prices over

00:55the next year, with Brent next year averaging $56 per barrel.

00:59Does it look like a race to the bottom, though? You have Exxon talking about the fact that they

01:04have low levels of debt, so they can take on more debt and finance more projects. Is that what the

01:09path looks like?

01:10So I think 25 and 26 are pretty exceptional in how much extra supply we expect to come to the

01:15markets, coming both from core OPEC producers like Saudi Arabia, UAE, and others, and then also from

01:20production in the Americas, especially from Latin America, actually, Brazil and Guyana.

01:26If you look out further down the horizon, we see a sharp slowdown in supply growth from

01:3127 onward. So we really think of this as the last jump in global supply. And that's why I

01:37think prices will probably come down somewhat more next year, the last leg lower before we

01:42likely recover as demand probably keeps growing while supply starts to moderate.