World faces oil surplus in 2025 on weak demand, IEA says

Global oil supply will exceed demand in 2025 even if Opec+ cuts remain in place, the International Energy Agency (IEA) said on Thursday, as rising production from the United States and other outside producers outpaces sluggish demand.

The prospect of a more than 1 million barrels per day (bpd) excess supply - equal to over 1 per cent of world output - is a headwind for Opec+, which comprises the Organisation of the Petroleum Exporting Countries and allies such as Russia - in its plan to start raising output.

Oil demand growth has been weaker than expected this year in large part because of China. After driving rises in oil consumption for years, economic challenges and a shift towards electric vehicles are tempering oil growth prospects in the world’s second-largest consumer.

“China’s marked slowdown has been the main drag on demand,” the IEA said in its monthly oil market report.

“Rapid deployment of clean energy technologies is also increasingly displacing oil in transport and power generation, adding downward pressure to otherwise weak demand drivers,” the report added.

The Paris-based agency left its 2025 oil demand growth forecast little changed at 990,000 bpd. At the same time, it expects non-Opec+ nations to boost supply by 1.5 million bpd, driven by the United States, Canada, Guyana and Argentina - more than the rate of demand growth.

Next year’s surplus, as forecast by the IEA, could make it harder for Opec+ to bring back production. Earlier this month, Opec+ again postponed a plan to start easing output cuts amid falling 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.

According to the IEA, Chinese demand growth is set to reach just 140,000 bpd this year, a tenth of the 1.4 million bpd demand growth of 2023.