The IEA's forecast follows OPEC+'s announcement of a planned production increase of 138,000 barrels per day (bpd). This modest increase contrasts with the 2 million bpd production cut implemented in October 2022 to stabilize falling oil prices.
According to the IEA's March Oil Market Report, global oil supply is projected to exceed demand in 2025, resulting in a surplus. The IEA forecasts demand growth of approximately 1 million bpd in 2025, up from 830,000 bpd in 2024.2 However, the IEA also projects oil supply to reach 104.4 million bpd in 2025, an increase of 1.4 million bpd from 2024, causing concern in energy markets.
The IEA attributes the supply growth primarily to non-OPEC producers, including the United States, Canada, Brazil, and Guyana, whose combined contribution is expected to be around 2.2 million bpd. In comparison, OPEC+ production growth is projected to be approximately 220,000 bpd.
OPEC+ has faced pressure from the U.S. and other oil-consuming nations to increase production. Analysts believe this pressure, combined with internal factors, may lead OPEC+ to unwind its existing production cuts as planned in April.If implemented, this would add 1.4 million bpd to the market.
Beyond external pressure, some OPEC+ members seek increased production to boost revenue, while others have consistently exceeded their quotas. These members appear to have abandoned hopes of oil prices reaching $100 per barrel in the near term, recognizing its unlikelihood.
The IEA maintains that even if OPEC+ proceeds with its planned production increase, the supply-demand imbalance will persist. This stance contrasts with the IEA's November 2023 projections, which anticipated stronger demand growth aligning with increased supply.
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OPEC+ has also revised its 2025 demand growth forecast downward, from 1.54 million bpd to 1.45 million bpd, despite previous disagreements with the IEA's figures.
The recent surge in oil supply coincides with a precarious period for energy markets. Western economies are struggling to maintain consistent growth, with even marginal quarterly gains often followed by subsequent slowdowns. For example, the latest UK economic data reveals a deceleration, compounded by transatlantic trade tensions that further dampen growth prospects.
Adding to investor anxiety is the uncertainty surrounding China's economy. Caught between President Trump's tariffs and the need to reduce Iranian oil imports, China faces significant economic headwinds. This situation not only impacts China's growth but also deprives Iran of crucial revenue.
Consequently, the oil market sentiment is decidedly pessimistic. The Trump administration's apparent strategy to drive down oil prices, aimed at controlling inflation and boosting growth, further intensifies this volatility.
-- Crude Oil Futures --
