We are heading towards a historic supply-demand gap in the oil market, which has only occurred twice since the birth of the oil industry in the mid-19th century. A report released by the World Bank this week sounded the alarm for the upcoming oil supply surplus, which could seriously disrupt the global economic and trade landscape.

The World Bank stated in its latest "Commodity Market Outlook" report that "next year, global oil supply is expected to exceed demand by an average of 1.2 million barrels per day." The scale of this oversupply is difficult to exaggerate, as it has only been exceeded twice in history, in 1998 and 2020. Therefore, within the next six years, each barrel of oil may be below $60.

The oversupply is the result of multiple factors working together, including stagnant economic growth in Asia, rising sales of electric vehicles, increased use of liquefied natural gas powered trucks, expected production increases in non OPEC+countries, and sustained overproduction in OPEC+member countries (which currently produce an additional 7 million barrels of oil per day). The World Bank wrote in a blog post about this explosive report: "Almost twice as much as before the outbreak in 2019

Although this means that there will be a lot of economic uncertainty and turbulence in the coming year, it may also become an important force for market adjustment in the context of intensified conflicts in the Middle East, especially when it comes to commodity prices. Axios reported earlier this week that "even if geopolitical conflicts intensify, this new reality may suppress consumer energy prices. It could also seriously damage the long-term economy that supports oil production

This market volatility may bring some real relief to consumers in the short term, as they still feel the pressure of soaring inflation rates after the pandemic. The World Bank warns that commodity prices will not fall to pre pandemic levels, but are expected to reach a five-year low, with prices at gas stations and grocery stores plummeting significantly. It is expected that prices will fall by 10% as early as 2026, which could be the lifeline for many families who are struggling online or falling below the poverty line due to soaring prices over the past five years.

Although this is worth celebrating for ordinary citizens in developed countries, the prospects are quite bleak for those living in poorer countries. Indermit Gill, Chief Economist and Senior Vice President of the World Bank Group, said, "The decline in commodity prices and improved supply conditions can cushion geopolitical shocks, but these hardly alleviate the pain caused by high food prices in developing countries, where food price inflation is twice that of developed economies. High prices, conflicts, extreme weather, and other shocks will lead to food insecurity for over 725 million people by 2024

There are also oil and gas companies that are facing uncertainty, volatility, and declining revenue in the next decade. Fatih Birol, Executive Director of the International Energy Agency (IEA), said in a statement, "The World Bank's report based on the latest data predicts a severe oversupply this decade, indicating that oil companies may want to ensure that their business strategies and plans are prepared to face the changes happening

The prospects for super oil companies are not optimistic, even for those companies that are striving to diversify their investment portfolios and preparing for such a downturn.