The global oil supply is anticipated to surpass demand in 2023, as revealed in the latest insights from the International Energy Agency (IEA). The agency's analysis highlights a projected surplus of approximately 600,000 barrels per day, underscored by an uncertain economic landscape characterized by intensifying trade disputes. The IEA's report indicates that the macroeconomic factors influencing oil demand are deteriorating, primarily due to escalating trade tensions between the United States and several nations.
In its March oil market report, the Agency emphasized the impact of newly imposed tariffs by the U.S., coupled with retaliatory measures, which have shifted macroeconomic risks negatively. As the supply side expands, the Organization of the Petroleum Exporting Countries (OPEC) and its allies are preparing to gradually reverse previous production cuts.
Furthermore, the United States is achieving unprecedented levels of oil production, setting records that mark a significant increase in output. Notably, in February, Kazakhstan achieved its highest production levels to date, while both Venezuela and Iran have ramped up their oil flows ahead of approaching tighter sanctions. The IEA forecasts that global oil demand growth will pick up pace, projecting an increase to slightly over 1 million barrels per day for this year.
This is a significant rise from last year’s estimate of 830,000 barrels per day, adjusting from their earlier projection of an average of 1.1 million barrels per day. Asia is poised to drive the majority of this demand growth, expected to account for nearly 60% of the increase in demand gains by 2025, driven predominantly by China's expanding petrochemical sector. In the market, West Texas Intermediate crude oil prices fell by 1.2% during Thursday's trading session, settling at $66.88 per barrel.
Meanwhile, Brent crude dropped 1%, trading at $70.24 per barrel. Additionally, the IEA highlighted that proposed tariffs by the U.S. on imports from Canada and Mexico, which are set to be implemented on April 1st, could significantly affect oil flows and pricing. Last year, these two countries represented about 70% of U.S.
crude oil imports, indicating a potential for substantial market shifts. Recent data on oil demand has painted a rather lackluster picture, leaving analysts and market participants on edge about the near-future landscape of oil economics and trade dynamics..