Global Oil Markets Could See Glut in 2025 on Slowing Demand Growth: IEA

A maze of crude oil pipes and valves is pictured during a tour by the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas, on June 9, 2016. Richard Carson/Reuters

Global crude oil markets could face a surplus of more than 1 million barrels per day (bpd) in 2025, resulting in a worldwide supply glut, says the International Energy Agency (IEA) in a new report.

The Paris-based organization adjusted its oil demand growth projections on Nov. 14, saying that China’s economic slowdown could impact worldwide consumption levels.

According to the November estimates, crude demand growth is estimated to be 921,000 bpd, up from 862,000 bpd in October. Despite the uptick, this is below the growth of approximately 2 million bpd in 2023.

Looking ahead to 2025, the IEA revised its demand growth forecast lower by 8,000 barrels to 990,000 bpd.

Tepid demand for 2024 and 2025 is a reflection of “below-par global economic conditions” and the exhaustion of post-pandemic pent-up demand. The deployment of clean energy technologies has also offset “oil in transport and power generation,” the IEA said.

Researchers say that even if the Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, were to keep their voluntary production cuts intact, supply could still exceed demand by 1 million bpd next year.

At its Nov. 3 meeting, the oil cartel postponed a planned production hike to the end of December for the second time. Officials agreed to a delay to support prices, which plummeted after speculation that the OPEC+ alliance would follow through on an output hike.

OPEC will host its full bi-annual ministerial meeting on Dec. 1 to review the market outlook and discuss output policies for 2025, potentially offering insight into restarting activity.

These trends are welcomed for the global energy market after a few years of immense volatility, says the IEA.

“With supply risks omnipresent, a looser balance would provide some much-needed stability to a market upended by the Covid pandemic, Russia’s full-scale invasion of Ukraine and, most recently, heightened unrest in the Middle East,” the report stated.

Ultimately, the global economy will enjoy a “well-supplied market in 2025,” according to the IEA.

Phil Flynn, an energy strategist at The PRICE Futures Group, is skeptical of the IEA’s forecasts, writing an analytical note that its predictions on supply-demand dynamics “rarely come true.”

“Yet in all fairness, the fine line between a global oil market surplus or a global oil market supply deficit is thinner than it has been in the past because of record oil production of light oil in the US and rising production in other non-OPEC,” Flynn said.

But others also anticipate improving supply and easing demand in the coming year.

What Others Forecast

OPEC projected weaker worldwide oil demand growth for 2024 and 2025, alluding to lackluster consumption in China and India.

The group’s monthly report said global crude demand would grow by 1.82 million bpd, down from 1.93 million bpd in the October report. Next year’s global demand growth is expected to be 1.54 million bpd, down from the previous 1.64 million bpd.

An OPEC flag is seen on the day of an OPEC+ meeting in Vienna, Austria, on Oct. 5, 2022. Lisa Leutner/Reuters

A chorus of market watchers has penciled in a surplus next year.

ING commodity analysts anticipate global oil markets could register surpluses of more than 1 million bpd by the end of 2025 if OPEC+ unwinds cuts as planned.

“Putting aside geopolitical risks and focusing on fundamentals, the outlook for the oil market remains bearish in 2025, with an oil surplus through the year,” they wrote in a Nov. 7 note.

The global oil market could witness the third-largest surplus in recent oil market history, following imbalances observed during the 1998 industry collapse and the 2020 pandemic lockdowns, say World Bank economists.

“This oversupply is compounded by high levels of spare capacity, amounting to slightly more than 7 percent of current global production,” they said in a report earlier this month. “The size of the combined oil surplus and spare capacity in 2025—should it materialize—is likely to contain the impact of a likely increase in geopolitical tensions on oil prices.”

With President-elect Donald Trump expected to reverse various environmental policies and regulations from the current administration, analysts believe that domestic output could increase significantly amid record production.

Rob Thummel, the senior portfolio manager at Tortoise Capital Advisors, projects production will grow between 300,000 and 500,000 barrels per day. At the same time, he says, the oil and gas industry will look to take a balanced approach to drilling activity.

“We believe that economics not politics will prevail,” Thummel said in a note emailed to The Epoch Times. “U.S. oil and gas producers will look to maintain capital discipline and to ensure that global oil and natural gas markets remained balanced and avoid being oversupplied.”

US Supply Data

Domestic crude oil inventories registered a larger-than-expected build last week.

The U.S. Energy Information Administration (EIA) reported that oil supplies increased by 2.089 million barrels for the week ending Nov. 8. This was higher than the consensus forecast of 1.85 million barrels.

Gasoline stockpiles fell by 4.407 million barrels, down from the previous week’s injection of 412,000 barrels.

Heating oil inventories declined by 1.06 million barrels, while distillate stocks tumbled by 1.394 million barrels.

A separate EIA storage report showed that natural gas inventories rose by 42 billion cubic feet, in line with market estimates.

Energy markets shrugged off the bearish prognostications and solid weekly build toward the end of the trading week.

West Texas Intermediate, a U.S. benchmark for oil prices, rose $0.27, or 0.4 percent, to settle at $68.70 per barrel on the New York Mercantile Exchange.

Brent, the global benchmark, also added $0.28 or 0.4 percent, to $72.56 a barrel on London’s ICE Futures exchange.