TotalEnergies warns of oversupply risk as oil prices rise again

TotalEnergies has warned that global oil markets are tipping into excess supply, as Opec+ increases production while demand keeps weakening.

The alert came Thursday from the company’s Q2 earnings call, where it laid out how Saudi Arabia and its Opec+ allies are adding barrels back into the system in an attempt to grab market share. At the same time, slowing economies in major markets are dragging down consumption. The result: too much oil, not enough buyers.

According to TotalEnergies, the market is now dealing with “abundant supply” in a fragile environment shaped by Donald Trump’s tariff policies and broader geopolitical instability. The company said it expects oil prices to stay in the $60 to $70 per barrel range, squeezed by this imbalance between rising output and stagnant demand.

Earnings fall short as LNG takes a hit

TotalEnergies’ second-quarter results showed exactly how much this environment is weighing on profits. Net income for Q2 fell 30% year-over-year to $2.7 billion. That came in below analysts’ expectations. The company also saw a 20% drop in earnings from its LNG division, hit by lower prices across both oil and gas.

Still, the group chose to hold its dividend steady at €0.85 per share. It also confirmed that it would continue its $2 billion share buyback plan through the third quarter and maintained its capital expenditure guidance for 2025 between $17 billion and $17.5 billion.

But that came with a cost. Debt rose from $20 billion to $26 billion during the same period. Part of that came from its acquisition of German renewables firm VSB. The other part came from ramping up oil production by 3%.

The broader oil market isn’t following any clear trend either. On the same day TotalEnergies released its report, Brent crude gained $0.79 to reach $69.30 per barrel, while U.S. West Texas Intermediate rose by $0.83 to $66.08. The gains were linked to progress in trade negotiations and a stronger-than-expected fall in U.S. crude inventories.

Janiv Shah, analyst at Rystad, said, “The U.S. crude inventory draw and the trade efforts are adding some support to prices.” He was referring to Energy Information Administration data showing a weekly draw of 3.2 million barrels, which brought total U.S. crude inventories down to 419 million.

Analysts had forecast a smaller 1.6 million-barrel draw, making the figure notable.

Trade talks, inventory changes, and rising pressure on oil majors

While inventories are tightening in the U.S., the bigger picture still looks shaky. Two diplomats in Brussels said Wednesday that the U.S. and EU are discussing a possible trade agreement, which might include a 15% baseline tariff on EU imports and carve-outs for some sectors.

If successful, it would follow the same framework used in the Japan deal. But as of now, there’s no final agreement, just early momentum.

Meanwhile, energy majors like BP are also feeling the pressure. BP recently warned that it expects lower profits due to softening oil and gas prices. The entire sector is now being pulled in two directions: keep paying out to shareholders or react to weakening fundamentals. TotalEnergies, for now, seems to be trying to do both.

Global tensions are also clouding the path forward. Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, said, “Uncertainty over U.S.-China trade talks and peace negotiations between Ukraine and Russia is limiting further gains.” He predicted WTI prices would remain stuck in that same $60 to $70 range, matching the outlook TotalEnergies gave.

KEY Difference Wire: the secret tool crypto projects use to get guaranteed media coverage