World Set for Oil Surplus in 2025 Amid Weak Demand, Says IEA
The International Energy Agency (IEA) has projected a global oil surplus for 2025, with supply expected to surpass demand despite ongoing production cuts from OPEC+. Rising output from the United States and other non-OPEC+ countries, combined with sluggish demand, is driving this anticipated excess, the IEA announced in its latest oil market report.
According to the IEA, global oil supply is on track to exceed demand by more than 1 million barrels per day (bpd) in 2025, a surplus that amounts to over 1% of the world’s total production. This development poses a challenge for OPEC+, a coalition that includes the Organization of the Petroleum Exporting Countries and allies like Russia, which had been strategizing to gradually increase output.
A significant factor in the reduced demand growth is China, the world’s second-largest oil consumer. Economic pressures and an accelerated shift toward electric vehicles have slowed China’s demand for oil, a trend that has had a considerable impact on global consumption.
“China’s marked slowdown has been the main drag on demand,” the IEA stated in its report, adding that the “rapid deployment of clean energy technologies” is replacing oil in transportation and power generation, contributing to an overall dampening of oil demand growth.
The agency’s 2025 forecast for oil demand growth remains largely unchanged at 990,000 bpd. However, it anticipates that non-OPEC+ nations, particularly the United States, Canada, Guyana, and Argentina, will increase their production by 1.5 million bpd—outpacing the expected demand growth.
This potential surplus may complicate OPEC+’s strategy to resume higher production levels. Earlier this month, the alliance postponed plans to lift output amid declining oil prices. The IEA’s projection indicates that, even if OPEC+ continues its production cuts, global supply will still exceed demand by over 1 million bpd in 2025.
Following the report’s release, Brent crude prices edged lower, trading below $73 per barrel.
Related Posts
While 2025 is set for an oil surplus, the IEA made a modest upward revision to its 2024 oil demand growth forecast, increasing it by 60,000 bpd to reach 920,000 bpd, driven by higher-than-anticipated demand for gasoil.
“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 noted.
There is significant variance in industry forecasts for 2024 demand growth, partly due to differing projections for China’s demand and the global shift to cleaner fuels. The IEA’s estimates are at the lower end of the range. OPEC, by contrast, anticipates stronger growth and has projected higher demand increases of 1.82 million bpd for 2023 and 1.54 million bpd for 2024.
Chinese demand growth, according to the IEA, is forecast to rise by only 140,000 bpd this year—significantly less than the 1.4 million bpd growth seen in 2023.
