The HC Commodities Podcast

Episode: The State of Oil with Homayoun Falakshahi

Date: December 10, 2025
Host: Paul Chapman, HC Group
Guest: Homayoun Falakshahi, Head of Crude Analytics, Kpler

Episode Overview

This episode takes an expert deep-dive into the global crude oil markets, focusing on trends in the latter half of 2025 and projections for 2026 and beyond. Host Paul Chapman is joined by Homayoun Falakshahi of Kepler, who shares his insights on oversupply vs. geopolitical risk, OPEC’s strategy shifts, the evolving demand story (notably in China), shifting trade flows, the performance of trading desks, and the potential impact of geopolitical hotspots like Russia, Ukraine, and Venezuela. The tone is factual, clear, and sometimes cautiously speculative, providing listeners with a sharp, nuanced perspective.

Key Themes & Takeaways

• Oversupply vs. Geopolitical Risk: The central narrative in H2 2025 has been the tension between ample global oil supply and persistent risk premiums from ongoing geopolitical instability.
• OPEC’s Strategic Shift: OPEC surprised markets in 2025 by increasing supply despite oversupply, aiming to regain market share and set up for long-term strength.
• Demand Trends & China’s Role: Demand growth softens; China's oil consumption approaches a plateau due to EV adoption but continues to stockpile massively, influencing prices.
• Grade Imbalances & Trade Flows: Major shifts in crude grades and refinery locations are creating logistical and market structure impacts, contributing to new trading dynamics.
• Trade Desk Dynamics: Crude trading has been challenging, but product desks have thrived amid refinery disruptions and sharper grade differentials.
• Geopolitics: Russia-Ukraine and Venezuela remain major wildcards, but actual supply disruption impacts are increasingly muted given the scale of global oversupply.
• Looking Ahead: Industry is facing a “boring but complex” market—rangebound prices, but ample opportunities for volatility in grade spreads, arbitrage, and geopolitics.

Detailed Breakdown with Discussion Points, Quotes, and Timestamps

1. Oil Market Overview: The 2025 Narrative

[02:01-04:00]

• Oversupply story dominates: Accelerated supply from OPEC+ and non-OPEC producers converged in H2 2025.
• Yet, prices didn’t crash: Geopolitical risks (Russia, Ukraine, Middle East, Venezuela) and other factors (e.g., Chinese stockpiling, sanctions) kept prices from collapsing.

“Prices have been in a declining trend…a lot more supply in the market. At the same time…higher geopolitical risks…a lot of uncertainties…prevented prices from crashing.”
— Homayoun Falakshahi, [02:01]

2. Is This Just the Commodity Cycle? Investment Catch-up

[04:00-06:53]

• Cyclical pattern: Many major supply increases were from projects sanctioned years ago, especially in the Atlantic Basin: Brazil, Norway, Canada, Guyana, Argentina.
• Projects bunched together: Delays and early completions caused a wave of new barrels to hit simultaneously.
• Warning for the future: Low investment in recent years signals future supply problems beyond 2026.

“These are projects that were sanctioned more than three years ago... If we look forward to 2026, but especially beyond 2026, it also means that we're probably going to have potentially more supply problems because we haven't invested enough in the past two years.”
— Homayoun Falakshahi, [06:30]

3. OPEC’s Strategic Pivot: Surprising the Market

[07:52-13:24]

• Unexpected supply increases: OPEC’s production boost in 2025 surprised most analysts.
• Long-term market share play: OPEC shifting away from a “lose-lose” strategy to recapture lost ground, aiming to benefit when the investment gap translates into tightening after 2026.
• Spare capacity management: OPEC wants spare capacity to fall back to historic norms (~3% of demand) to amplify price moves on shocks.

“They took the market by surprise...a huge strategic shift...Their strategy had become a lose-lose strategy.”
— Homayoun Falakshahi, [08:05]

“At the beginning of this year…OPEC spare capacity was at 6.5 million barrels per day…much higher than historical levels...The key goal for them is to bring that level back to…3 million barrels per day so that when there’s a market event…bulls would not shy away.”
— Homayoun Falakshahi, [13:15]

4. Are Oil Prices Now “Rock Bottom”? Inflation and Context

[15:56-17:20]

• Inflation’s impact: When adjusted for inflation, today’s prices are as low as 2015 nadir levels.
• Relatively weak demand outlook: Unlike other commodities (e.g., copper), oil demand growth slowing, notably in China.

“If you do inflation adjusted for the price versus a decade ago, it's basically the same...today's price, inflation adjusted...is $43, which is basically where we were in 2015.”
— Paul Chapman, [15:56]

“Oil has been extremely stable in terms of prices...the main divergence between oil and other commodities is obviously...demand for oil is already nearing its peak and unfortunately for bulls, there's not much that really can be done.”
— Homayoun Falakshahi, [16:09]

5. China’s Demand, Stockpiling & Crude on Water

[20:34-23:58]

• EVs dampen growth: Chinese oil demand plateauing, with only 2% growth projected for 2026.
• Stockpiling as support: China has absorbed 90% of global oversupply since March by building inventories; this is a critical prop for prices.
• Strategic motives: Uncertainty surrounds whether China's stock building is preempting geopolitical risk.

“Between March and right now in December, China has absorbed about 90% of the oversupply that we had globally...We do think that, you know, this year they built their inventories by more than 100 million barrels. Next year, you know, we could have at least as much as a build, if not more.”
— Homayoun Falakshahi, [22:12]

6. Oil on the Water: Flows, Sanctions & Structure

[24:35-31:30]

• Oil on water jumps: Floating crude up by 200 million barrels (20%) since Sept 2025, echoing crisis-era surges.
• Not just oversupply: More complex shifts—western refineries closing, new capacity in Asia and Middle East increases tanker travel times; sanctions and quota limits also impact flows.
• Contango absent: Market structure remains backwardated despite glut; tight product market props up crude prices.

“We've seen oil and water Volumes jump by about 200 million barrels…since September…The pace…comparable with a crisis like COVID five years ago.”
— Homayoun Falakshahi, [24:35]

“There's a divergence between where refining capacity is and where the supply is...crude has to be on water for a longer time...because it is originating from the west of Suez and demand is mainly located further away, such as in Asia.”
— Homayoun Falakshahi, [25:58]

7. Trading Desk Performance: A Tale of Two Markets

[31:44-34:45]

• Crude desks struggle: 2025 crude trading largely “boring,” with low volatility and narrow range-bound markets.
• Product desks thrive: Greater volatility and shrinking supply of Russian diesel, combined with refinery disruptions, drove profits.

“For most of the year...the crude market's been more boring...I'm not surprised to hear that traders have been doing a lot better on the products side...”
— Homayoun Falakshahi, [32:28]

“Exports of Russian diesel especially have almost halved since spring this year and that has really allowed for a huge reshuffling of the products market.”
— Homayoun Falakshahi, [34:25]

8. Geopolitics: Russia/Ukraine and Venezuela

[35:18-45:07]

Russia/Ukraine

• Limited crude impact: Even a peace deal likely wouldn’t return EU to Russian crude soon; the West’s new trade order is here to stay.
• Sanctions tightening: The US has scope to escalate, e.g. through secondary sanctions, but has held back to avoid global price spikes.

“For crude markets...it's not going to have much impact even if you have a deal tomorrow...It's really hard to see the likes of the European Union...go back into buying Russian crude.”
— Homayoun Falakshahi, [35:52]

Venezuela

• Limited shock risk: Production is already heavily depleted; even a war would have minimal direct market impact, though heavy crude markets would tighten.
• US policy calculation: White House aware it holds the upper hand; biggest risk is to heavy sour crude segment, not overall price.

“Even if you go ahead with...the most extreme scenario, which would involve a war between the US and Venezuela...you still wouldn't have a huge reaction in the oil market...The country has lost about 70% of its production capacity in the past last seven, eight years.”
— Homayoun Falakshahi, [41:49]

9. 2026 and Wild Cards: What Could Surprise?

[46:06-49:09]

• Quality imbalance as the next theme: New supply is mostly light sweet; new demand (especially in Asia) is for medium/heavy sours.
• Trading opportunities: Grade differentials and arbitrage could offer more excitement than outright price volatility.
• Possible US Shale Peak? 2026 could mark the plateau for US shale, though it has consistently outperformed expectations.

“One of the key topics is going to be the crude quality imbalances…most of the new barrels coming from the Atlantic Basin are light sweet or medium sweet...the new capacity...in the Middle east and in Asia is…more inclined to process medium sour, heavy sour type of barrels.”
— Homayoun Falakshahi, [46:15]

“We do actually see US shale production peaking right now. So on a yearly average maybe it's going to remain stable. But on a December to December basis we do think that US output is going to decline by around 300kb.”
— Homayoun Falakshahi, [49:09]

10. Final Thoughts

[52:05-53:08]

• Crude market outlook: Rangebound prices, but fragility and political risks remain widespread and possibly underpriced.
• More volatility coming? The structure of markets may be more prone to shocks as supply gaps and geopolitical events interact.

“There’s hope and life there for the crude traders in this imbalance of grades. There continues to be significant political risk out there which many argue is underpriced and the world is becoming ever more fragile.”
— Paul Chapman, [52:29]

Notable Quotes

• “Prices have been in a declining trend…a lot more supply in the market. At the same time…higher geopolitical risks…a lot of uncertainties…prevented prices from crashing.”
  — Homayoun Falakshahi, [02:01]

• “Their [OPEC’s] strategy had become a lose-lose strategy…It was becoming a losing strategy on both sides.”
  — Homayoun Falakshahi, [08:05]

• “Oil...has been extremely stable in terms of prices...demand for oil is already nearing its peak and unfortunately for bulls, there’s not much that really can be done.”
  — Homayoun Falakshahi, [16:09]

• “China was, has absorbed about 90% of the oversupply that we had globally.”
  — Homayoun Falakshahi, [22:12]

• “Exports of Russian diesel especially have almost halved since spring this year and that has really allowed for a huge reshuffling of the products market.”
  — Homayoun Falakshahi, [34:25]

• “One of the key topics is going to be the crude quality imbalances...most of the new barrels...are light sweet...the new demand...more inclined to process medium sour, heavy sour type of barrels.”
  — Homayoun Falakshahi, [46:15]

Key Timestamps

• Market State & 2025 Summary: [02:01-06:53]
• OPEC’s Strategic Shift: [07:52-13:24]
• Inflation & “Real” Oil Prices: [15:56-17:20]
• China's Plateau & Stockpiling: [20:34-23:58]
• Oil on Water/Refining Shift: [24:35-31:30]
• Trading Desk Themes: [31:44-34:45]
• Russia/Ukraine/Venezuela Analysis: [35:18-45:07]
• 2026 Surprises & Grade Imbalances: [46:06-49:47]
• US Shale Production Outlook: [49:47-51:33]
• Closing Thoughts: [52:05-53:08]

Conclusion

This episode provides a thorough, data-driven examination of the global crude oil market as 2025 draws to a close. Listeners gain a robust understanding of how oversupply, muted demand growth, and new trade flow patterns are shaping the landscape. Political volatility lurks, but the greatest opportunities may lie in understanding shifting crude quality spreads and the realignment of refinery infrastructure. Homayoun Falakshahi’s measured optimism is matched by a clear-eyed view of the challenges and surprises still likely to emerge in the year ahead.