On Thursday, the International Energy Agency (IEA) stated in its latest monthly report that despite OPEC+'s decision last week to delay production increases, the global oil market will still face a supply surplus next year.
The IEA predicts that if OPEC+ resumes production as planned starting in April next year, the global market will face a surplus of 1.4 million barrels per day. Even if the alliance completely cancels next year's production increase, there will still be a surplus of 950,000 barrels per day.
In the face of low crude oil prices, OPEC+, led by Saudi Arabia and Russia, agreed again on December 5 to postpone its plans to restore production and to slow down the pace of production increases in the second quarter of next year.
The IEA states that OPEC+'s delayed production increase has 'significantly reduced the potential supply surplus that could occur next year.' Nevertheless, 'the strong supply growth from non-OPEC+ countries and the relatively moderate growth in global oil demand make the market look well-supplied.'
Since the beginning of July, Brent crude oil prices have fallen by about 16%, trading below $74 per barrel, as traders dismissed the Middle East conflict and turned their attention to signs of lost momentum in oil consumption engines over the past two decades.
For months, OPEC and its allies have been seeking to restore production that has been idle in recent years, but these efforts have been thwarted by worsening market conditions.
The alliance is also working to ensure that member countries adhere to their agreed production limits. According to IEA data, in November, OPEC+ overproduced a total of 680,000 barrels per day, driven by the UAE, Iraq, and Russia.
The agency predicts that this year global oil demand will increase by 840,000 barrels per day, reaching an average of 102.8 million barrels per day, a downward adjustment of 80,000 barrels per day from previous estimates. The growth in oil demand next year is also expected to remain sluggish, although the latest forecast shows a slightly more optimistic outlook than the previous report. The agency has raised its oil demand growth forecast for 2025 by 90,000 barrels per day to 1.1 million barrels per day, mainly due to China's recently announced economic stimulus measures. This is expected to raise global oil consumption to 103.9 million barrels per day.
The IEA states that demand growth is weak in the next two years, reflecting an 'overall unfavorable macroeconomic environment and changing patterns of oil use.' Growth will be concentrated in petrochemical feedstocks, while demand for transport fuels is suppressed by efficiency improvements and electrification.
Meanwhile, the agency maintains its forecast for non-OPEC+ supply growth in 2024 and 2025 at 1.5 million barrels per day, primarily driven by the United States, Brazil, Canada, and Guyana.
In recent months, OPEC's secretariat in Vienna has retracted its strongly bullish forecasts for the oil market, aligning more closely with the IEA's more pessimistic outlook. OPEC has cut its growth forecast for demand in 2024 for five consecutive months, with a cumulative reduction of 27%, and the latest monthly report on Wednesday showed the largest cut to date.
Article forwarded from: Jinshi Data