IEA Warns of Significant Oil Surplus by 2025

The International Energy Agency (IEA) issued a warning in its monthly report today, indicating that the global oil market is on track for a significant imbalance. The agency forecasts a surplus of 4.09 million barrels per day by 2025, which represents approximately 4% of global demand and significantly exceeds most analysts' estimates.

This forecast is the latest advisory from the agency, which provides guidance to industrialized nations, highlighting concerns over impending overproduction. The report stated, "Global oil balances appear increasingly out of sync; while worldwide supply continues to rise, demand growth remains historically modest."

The anticipated surplus arises amid increasing global oil production levels. The "OPEC+" alliance, which includes OPEC and allies such as Russia, has raised its output since April. Additionally, key producers outside the alliance, including the United States and Brazil, have also brought more oil to market, raising concerns about oversupply and exerting downward pressure on prices.

At the same time, global demand growth remains modest. The IEA has raised its demand growth forecast for 2025 by 70,000 barrels per day to 770,000 barrels per day, driven by increased needs from the petrochemical industry. However, the agency emphasizes that supply growth is outpacing demand growth.

Regarding long-term forecasts, the agency has increased its estimates for global oil supply to 3.1 million barrels per day for 2025 and 2.5 million barrels per day for 2026, marking an increase of nearly 100,000 barrels per day compared to previous estimates for each year.

This outlook contrasts sharply with OPEC's projections, which, according to Reuters calculations based on their monthly report, expect only a slight surplus of 20,000 barrels per day in the coming year.

On another note, the agency revealed that global oil production in October was approximately 6.2 million barrels per day higher than at the beginning of the year, with increases evenly distributed between OPEC+ countries and producers outside the alliance. Saudi Arabia alone contributed 1.5 million barrels per day to this increase, while Russia added only 120,000 barrels per day amid sanctions and the ongoing conflict in Ukraine.

The agency confirmed that Russian exports have continued "largely uninterrupted," despite new U.S. sanctions targeting companies like "Rosneft" and "Lukoil," which the agency views as potentially having a "greater long-term impact" on oil markets.

Global oil inventories also saw a significant rise, reaching their highest level since July 2021, nearing the eight billion barrel mark. This increase was driven by a substantial rise in oil transported and stored at sea, which alone rose by about 80 million barrels in September. Preliminary data for October suggests that this upward trend in global inventories is continuing.

Markets reacted swiftly to this report, with oil prices rising to around $63 per barrel, partially recovering from a 2% decline recorded on Wednesday.