Macro Bites – Global Oil Market Returns to Surplus as Supply Recovers and Demand Weakens

Reuters reports the global oil market is returning to excess supply as demand drops due to high prices.  JPMorgan suggests the combination of recovering Middle Eastern oil flows, rising production from other countries and weak demand have pushed global ⁠supply above consumption once again.  "We estimate the global oil market returned to a surplus of 1.1Mbpd ​in Sept, and 1.4Mbpd in Oct., nearly matching last year’s average surplus of 1.3Mbpd.” Goldman Sachs estimates global consumption has fallen by 3.3Mbpd (after reaching a low of -4.1Mbpd in Sept.) and global inventories are once again rising.

Global nickel prices surged 3.8% to a five-week high on Thursday, with LME three-month futures touching $16,415/t (before closing at $16,322/t).   The sudden price jump is primarily driven by supply anxieties out of Indonesia (world's largest nickel producer) compounded by aggressive regulatory shifts aiming to curb a massive global oversupply. To combat a global nickel surplus estimated at roughly 800kt, the Indonesian government and its National Economic Council are actively planning more aggressive production quota cuts for ‘27 through the annual RKAB approval system.

The immediate trigger for the nickel rally was an announcement by Indonesia’s Forest Area Enforcement Task Force targeting companies affiliated with major local businessman Arif Kurniawan due to alleged illegal operations in protected forest zones, alongside licensing and permitting irregularities. Because Kurniawan commands a massive share of the country's nickel ore logistics, the sudden enforcement has sparked near-term shortage fears among local smelters.

Chile's state-owned copper giant Codelco is facing a major scandal after confirming it artificially inflated its copper production figures by 24kt in ’24 and 18kt in ‘25. Newly appointed board chair Bernardo Fontaine disclosed the full scope of the reporting irregularities at an extraordinary shareholders' meeting on Thursday.  A separate tracking irregularity has affected an additional 17kt of copper inventory. This is projected to require a ‘26 accounting inventory write-down of 15.2kt resulting in a direct financial loss of $120M to $140M. The over-reporting marks a significant blow to the credibility of the world's top copper producer as it struggles with declining output, high debt, and operational delays.

Two Fed officials on Thursday made a case for modest and steady interest rate increases to tackle above-target inflation, in the first round of comments from central bankers after Democrats won control of Congress and made gains at the state level that could change the path of price pressures in the economy.  Cleveland Fed President Beth Hammack [2026 FOMC Voter] said, "I expect that monetary policy will need to move to a restrictive stance to bring inflation back to 2% in a timely manner." Richmond Fed President Thomas Barkin said inflation is “too high” and “the implications for policy are pretty straightforward…gradual makes sense."

AI watch: Apple is reducing employee AI budgets as part of a cost cutting effort.  Last month, it lowered the daily spending cap for some engineers using AI models from $300 to $200.  It is now planning further cuts down to $100 and as little as $25 for some teams.  Separately, ING put up for sale $500M of data center loans to operators such as Vantage Data Centers and CyrusOne (with bids due 11/19).