TotalEnergies Warns of Oil Oversupply Risk Amid OPEC+ Output Surge and Weakening Demand

TotalEnergies has issued a cautionary warning about potential oversupply risks in global oil markets, despite a recent upward trend in prices, citing rising production from OPEC+ members and weakening demand amid geopolitical uncertainties. The alert emerged during the company’s Q2 earnings call, where executives highlighted that Saudi Arabia and its OPEC+ allies are increasing output to capture market share, while slowing economies in major consumer regions are reducing consumption [1]. This imbalance, the company said, threatens to destabilize prices already constrained by Donald Trump’s tariff policies and broader geopolitical tensions [1].

The warning comes as TotalEnergies’ own financial performance reflects the challenges of the current market environment. Second-quarter net income fell 30% year-over-year to $2.7 billion, driven by weaker oil and gas prices that pressured earnings from its liquefied natural gas (LNG) division, which saw a 20% decline [1]. Despite the results, the company maintained its dividend at €0.85 per share and committed to continuing its $2 billion share buyback program through Q3, while reaffirming its 2025 capital expenditure guidance of $17 billion to $17.5 billion [1]. These measures, however, came at the cost of increased debt, which rose from $20 billion to $26 billion during the period, partly due to the acquisition of Germany’s VSB renewables firm and higher oil production [1].

The oil market’s fragility is further underscored by mixed signals in global trade and inventory dynamics. On the day TotalEnergies released its earnings, Brent crude rose $0.79 to $69.30 per barrel, while U.S. West Texas Intermediate gained $0.83 to $66.08, supported by progress in U.S.-China trade negotiations and an unexpected drawdown in U.S. crude inventories. The Energy Information Administration reported a 3.2 million-barrel weekly draw, exceeding analysts’ forecasts of 1.6 million barrels and reducing total U.S. crude inventories to 419 million [1]. Analyst Janiv Shah of Rystad noted that these developments provided temporary price support but emphasized the market’s susceptibility to oversupply risks [1].

Geopolitical uncertainties complicate the outlook further. Diplomats in Brussels confirmed ongoing U.S.-EU trade discussions, which could introduce baseline tariffs on EU imports and carve-outs for specific sectors, though no final agreement has been reached [1]. Meanwhile, U.S.-China trade tensions and stalled peace talks between Ukraine and Russia remain significant overhangs, with Nissan Securities’ Hiroyuki Kikukawa predicting that WTI prices will remain trapped in a $60–$70 range for the foreseeable future [1].

TotalEnergies’ warnings align with broader industry caution. Commerzbank analysts noted that while near-term trade optimism and inventory draws have lifted prices, persistent demand concerns and OPEC+’s planned production hikes could limit long-term gains [1]. The company’s strategy of balancing shareholder returns with operational resilience highlights the sector’s struggle to navigate volatile fundamentals. By maintaining buybacks amid earnings declines, TotalEnergies signals confidence in its ability to manage costs and optimize operations, even as it acknowledges the risks of a market increasingly shaped by supply-side pressures and geopolitical volatility [1].

Sources:

[1] [TotalEnergies Maintains Buyback Pace Despite -2] [https://www.marketscreener.com/news/totalenergies-maintains-buyback-pace-despite-2-ce7c5cd3d189f424]

[2] [European Midday Briefing : Shares Gain on Trade Deal Progress] [https://www.marketscreener.com/news/european-midday-briefing-shares-gain-on-trade-deal-progress-ce7c5cd3dc8bff27]