KEY POINTS
- Oil supply will exceed demand by over 1 million bpd.
- China’s slowing economy is the main drag on demand.
- Non-OPEC+ countries will lead oil supply growth in 2025.
The International Energy Agency (IEA) forecasts a surplus in global oil supply in 2025, even if OPEC+ production cuts remain. Rising output from non-OPEC+ producers such as the United States, Canada, Guyana, and Argentina is expected to outpace sluggish demand growth, the Paris-based agency said Thursday in its monthly oil market report.
China’s slowdown drives weaker oil demand growth
The IEA projects a surplus of more than 1 million barrels per day (bpd) in 2025, equivalent to over 1% of global production. The oversupply is attributed to weaker-than-expected demand growth, particularly in China, alongside a global shift toward cleaner energy alternatives.
China’s economic slowdown and its shift toward electric vehicles are curbing oil consumption in the world’s second-largest consumer, the IEA noted. “China’s marked slowdown has been the main drag on demand,” the report stated, adding that clean energy technologies are further displacing oil use in transportation and power generation.
Reuters highlighted that the IEA’s oil demand growth forecast for 2025 remains steady at 990,000 bpd, while supply from non-OPEC+ countries is expected to grow by 1.5 million bpd, outstripping demand growth.
The projected surplus could challenge OPEC+ plans to increase production. Earlier this month, OPEC+ deferred plans to ease production cuts amid declining 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.
OPEC+ faces challenges as oil oversupply looms
For 2024, the IEA adjusted its oil demand growth forecast upward by 60,000 bpd to 920,000 bpd, citing stronger-than-expected gasoil demand. The report highlights that the sub-1 million bpd growth in both 2024 and 2025 reflects below-average economic conditions and the fading impact of pent-up demand from the COVID-19 pandemic.
Industry forecasts for 2024 demand growth vary significantly. Reuters further stated that the IEA’s estimate is on the lower end at 920,000 bpd, while OPEC projects more robust growth of 1.54 million bpd for next year. The IEA estimates Chinese oil demand growth at just 140,000 bpd in 2024, far below the 1.4 million bpd growth seen in 2023.
