Uche Cecil Izuora
The International Energy Agency (IEA) said on Thursday, predicted that global oil supply may exceed demand in 2025 even if the Organization of Petroleum Exporting Countries (OPEC+ ) cuts remain in place.
The Agency based its prediction on rising production from the United States and other outside producers which it says would outpace sluggish demand.
The prospect of a more than 1 million barrels per day (bpd) excess supply – equal to over 1 per cent of world output – is a headwind for OPEC+, which comprises the Organization of the Petroleum Exporting Countries and allies such as Russia in its plan to start raising output.
Oil demand growth has been weaker than expected this year in large part because of China. After driving rises in oil consumption for years, economic challenges and a shift towards electric vehicles are tempering oil growth prospects in the world’s second-largest consumer.
“China’s marked slowdown has been the main drag on demand,” the IEA said in its monthly oil market report.
“Rapid deployment of clean energy technologies is also increasingly displacing oil in transport and power generation, adding downward pressure to otherwise weak demand drivers,” the report added.
The Paris-based agency left its 2025 oil demand growth forecast little changed at 990,000 bpd. At the same time, it expects non-OPEC+ nations to boost supply by 1.5 million bpd, driven by the United States, Canada, Guyana and Argentina – more than the rate of demand growth.
Next year’s surplus, as forecast by the IEA, could make it harder for OPEC+ to bring back production.
Earlier this month, OPEC+ again postponed a plan to start easing output cuts amid falling prices.
“Our current balances suggest that even if the OPEC+ cuts remain in place, global supply exceeds demand by more than 1 million bpd next year,” the IEA said.
Oil prices traded slightly weaker after the report was released, with Brent crude trading below $73 a barrel.
The IEA also made a slight upward adjustment to its 2024 oil demand growth forecast of 60,000 bpd on the month to 920,000 bpd, on higher than expected gasoil demand.
“The sub-1 million bpd growth pace for both years reflects below-par global economic conditions with the post-pandemic release of pent-up demand now complete,” the IEA said.
Forecasts on the strength of demand growth in 2024 vary widely, partly due to differences over demand from China and the pace of the world’s switch to cleaner fuels, and the IEA’s view is at the lower end of industry estimates.