The International Energy Agency has heightened its global oil demand outlook for 2025, projecting an increase of 1.1 million barrels per day next year, surpassing its previous forecast of 990,000 barrels. This adjustment comes amid a strategic decision by key oil-producing nations to prolong output cuts aimed at maintaining market stability.
Recent actions taken by members of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, to extend voluntary oil production cuts have substantially mitigated the anticipated supply overhang for 2025. The agency stated, 'Even so, persistent overproduction from some OPEC+ members, robust supply growth from non-OPEC+ countries, and relatively modest global oil demand growth leaves the market looking comfortably supplied in 2025.' During Thursday's trading, West Texas Intermediate crude oil dipped 0.1% to $70.24 a barrel, while Brent crude held nearly flat at $73.53.
'Oil prices were little changed as a forecast for ample supply in the oil market offset optimism stemming from rising expectations of a US interest rate cut,' remarked D.A. Davidson in a note to clients. The IEA anticipates a supply overhang of 950,000 barrels daily next year, which could rise to 1.4 million barrels if OPEC+ commences unwinding voluntary cuts after March.
A crucial uncertainty in this scenario is the compliance level with established targets; estimates show collective output at 680,000 barrels per day, exceeding targets in November. Projected total oil supply is set to increase by 630,000 barrels daily in 2024 and 1.9 million barrels in 2025, even without OPEC+'s unwinding of cuts.
The IEA has revised its global oil demand growth outlook for this year down to 840,000 barrels a day from the previous 920,000 barrels. The growth in demand within non-OECD countries has notably decelerated, particularly in China. However, emerging Asia is anticipated to lead the demand increases in 2024 and 2025.
In contrast, OPEC has cut its global oil demand projections for 2024 and 2025 for the fifth consecutive month, with the majority of this revision attributed to recently released bearish data for the third quarter..