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Oil market heading for big surplus: IEA

IEA’s downward revision comes on the heels of a similar move by Opec

Published: Tue 15 Oct 2024, 10:16 PM

By
Issac John

An oil pump jack in Nolan, Texas.Oil prices have risen in recent weeks on investor concern that Israel may retaliate against a missile attack from Iran. — AFP file

The global oil market is heading for a sizeable surplus in the new year, the International Energy Agency said on Tuesday as it cut 2024 demand growth forecast by 40,000 barrels per day and raised the projection for 2025 by 50,000 bpd.

The IEA, which manages industrialised countries' emergency oil stocks, reassured markets that the agency stood ready to act if needed to cover any supply disruption from Iran.

The IEA’s downward revision of oil demand for 2024 comes on the heels of a similar move by Opec, which on Monday cut its forecast for global oil demand growth in 2024 and lowered its projection for next year, marking the producer group's third consecutive downward revision.

The weaker outlook highlights the dilemma faced by Opec +, which is planning to start raising output in December after earlier delaying the hike against a backdrop of falling prices.

Oil prices have risen in recent weeks on investor concern that Israel may retaliate against a missile attack from Iran, a major oil exporter and Opec member, by hitting its oil facilities or nuclear sites.

The Paris-based IEA said public stocks were more than 1.2 billion barrels and spare capacity in Opec+ stood at historic highs. Opec+ comprises the Organisation of the Petroleum Exporting Countries and allies such as Russia.

"As supply developments unfold, the IEA stands ready to act if necessary," the agency said in a monthly report on Tuesday.

"For now, supply keeps flowing, and in the absence of a major disruption, the market is faced with a sizeable surplus in the new year."

Oil was down more than 4.0 per cent a barrel towards $74 on Tuesday, pressured by the weaker demand outlook and after a media report said Israel is willing not to strike Iranian oil targets.

According to the IEA, world oil demand will rise by 860,000 barrels per day this year, down 40,000 bpd from the previous forecast. For 2025 it sees an expansion of 1.0 million bpd, about 50,000 bpd higher than expected last month.

The IEA expects demand from China, which has for years driven global rises in oil consumption, to grow by 150,000 bpd in 2024, down 30,000 bpd from the previous forecast. Consumption dropped by 500,000 bpd in August compared to the same month last year, a fourth consecutive month of declines.

"Heightened oil supply security concerns are set against a backdrop of a global market that – as we have been highlighting for some time – looks adequately supplied," the IEA said.