IEA Predicts Significant Oil Supply 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 up to 4.09 million barrels per day in 2025, representing approximately 4% of global demand, which surpasses most analysts' predictions.

This projection adds to the agency's ongoing alerts to industrialized nations about a looming oversupply. The IEA noted, "The global oil market balances appear increasingly skewed; while supply continues to rise, demand growth remains modest compared to historical trends."

The anticipated surplus coincides with a surge in global oil production. The OPEC+ coalition, which includes OPEC members and allies like Russia, has ramped up production since April. Additionally, major non-OPEC producers, particularly the United States and Brazil, have increased their output, raising concerns about oversupply and putting downward pressure on prices.

While global demand growth remains modest, the IEA has adjusted its forecast for oil demand growth in 2025 upward by 70,000 barrels per day, projecting an increase to 770,000 barrels per day, largely driven by demand from petrochemical facilities. Nevertheless, the agency emphasizes that supply growth is outpacing demand growth.

In its long-term outlook, the IEA has revised its estimates for global oil supply growth in 2025 to 3.1 million barrels per day and to 2.5 million barrels per day for 2026, marking an increase of nearly 100,000 barrels per day from previous forecasts for both years.

This outlook contrasts sharply with OPEC's predictions, which, according to Reuters calculations based on its monthly report, suggest a slight surplus of no more than 20,000 barrels per day for the upcoming year.

The IEA also reported that global oil production in October was approximately 6.2 million barrels per day higher than at the beginning of the year, with contributions evenly split between OPEC+ and non-OPEC producers. Saudi Arabia accounted for a significant portion of this increase, adding 1.5 million barrels per day, while Russia's increase was limited to 120,000 barrels per day due to sanctions and the ongoing conflict in Ukraine.

Despite new U.S. sanctions targeting "Rosneft" and "Lukoil," the agency noted that Russian oil exports have continued largely uninterrupted, which it considers could have significant long-term implications for the oil market.

Global oil inventories have also seen a notable increase, reaching their highest levels since July 2021 in September, nearing eight billion barrels. This rise was attributed to a substantial increase in oil transported by sea and stored, which surged by approximately 80 million barrels in September alone. Preliminary data for October suggests that this upward trend in inventories is continuing.

In response to the report, oil prices rose to around $63 per barrel, partially recovering from a 2% decline observed on Wednesday.