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The International Energy Agency predicts that global oil supply will outweigh demand this year, despite escalating conflicts in the Middle East creating fears of chaos.
Global oil production is expected to increase to 104.9 million b/d by 1.8 mn barrels per day in 2025, exceeding the forecast demand of 103.8 mn b/d, leading to an increase in oil inventories over the year, the Intergovernmental Energy Advisory Board said in its annual report.
“In the absence of major disruption, the oil market in 2025 appears to be well-supplied,” the IEA said.
The increase in supply is expected to come from both the OPEC+ cartel, which is in the process of reversing a series of production cuts, and non-OPEC+ producers, which add an average of 1.4 million b/d per year.
At the same time, weak consumption in China and the US will curb global demand. This is expected to increase by 720,000 b/d this year, with an increase in previous forecasts below 740,000 b/d.
As supply exceeds demand, the amount of oil stored worldwide has risen by an average of 1 million b/d from February, and by a “huge” 93mn barrel in May alone, the IEA added. However, total inventory was still at 90mn barrels than a year ago.
The IEA warned that the Israeli-Iran conflict posed “geopolitical risks to oil supply security,” but added that “at the time of writing it had no impact on Iran’s oil flow.”
Iran partially halted production in South Pur, the world’s largest natural gas field, after an Israeli air attack over the weekend, but it was still unclear whether production had been affected.
The Sharan Oil Depot and refinery near Tehran were also targeted, but no damage was reported, he added.
In another report on the outlook for 2030, the IEA predicts that oil supply will continue to outperform demand over the next five years. Global oil demand will increase by 2.5 million b/d between 2024 and 2030, with the “plateau” expected to reach a “plateau” of 105.5mn “plateau” by the end of the decade.
It said supply will rise much faster, with global production capacity rising by over 5 million b/d to 114.7 mn b/d.
The slowdown in oil demand growth will be driven largely by China. This will be driven by China, where consumption is expected to peak in 2027, following a surge in electric vehicle sales and the continued rollout of high-speed rail and gas-powered trucking.
The forecast is consistent with forecasts made by China’s biggest oil company, but this is the first time the IEA has firmly dated China’s peak demand.
