The International Energy Agency (IEA) has indicated that global oil supply will surpass demand by 2025, even if OPEC+ continues its production cuts. This is due to rising output from the U.S. and other non-member oil-producing countries outpacing the tepid growth in demand. OPEC+, which includes OPEC members and countries led by Russia, accounts for over 40% of global crude production.
OPEC+ currently maintains a voluntary production cut of approximately 2.2 million barrels per day, although an initial plan to increase production starting in October has been postponed due to persistently low international oil prices. This delay is expected to continue into the next year.
According to the IEA, global oil consumption is projected to grow by 920,000 barrels per day this year, less than half the increase seen in 2023. Next year, demand is forecasted to rise by 990,000 barrels per day. The report points out that oil demand growth over the past two years has remained below 1 million barrels per day. The sluggish increase is attributed to a global economic expansion below the historical average and the full release of pent-up demand following the COVID-19 pandemic. In addition, the rapid adoption of clean energy technologies is reducing oil's role in transportation and power generation sectors.
IEA's forecast shows non-OPEC oil-producing countries are expected to increase their supply by 1.5 million barrels per day next year. This growth is primarily driven by the U.S., Canada, Guyana, and Argentina, surpassing the projected increase in global oil demand. This indicates that the current oversupply situation in the oil market is unlikely to change, even if OPEC+ maintains its voluntary production cuts.
The IEA's demand forecast is considered conservative within the industry. In contrast, OPEC presents a more optimistic outlook. Despite lowering their demand growth expectations for this year and next, OPEC still expects growth of 1.82 million and 1.54 million barrels per day, respectively, which is significantly higher than the IEA's predictions.
Some analysts suggest that if production cuts fail to sustain the market, OPEC+ might gradually abandon the current voluntary reduction measures. Tom Kloza, Head of Global Energy Analysis at OPIS, predicts that in such a scenario, international oil prices could fall to $30 or $40 per barrel.
