The International Energy Agency has said that the global oil markets will face a glut next year, despite OPEC+’s decision last week to delay supply increases.
The IEA predicted in its monthly report that world markets will be oversupplied by 1.4 million barrels a day if OPEC+ follows through with plans to resume output in April. Even if OPEC+ cancels next year’s planned increases, there will still be an excess of 950,000 barrels a day, according to Bloomberg.
On December 5, the OPEC+ cartel, led by Saudi Arabia and Russia, decided to further delay plans to restore shut-in output amid declining crude prices and to reduce the pace of production increases once they begin in the second quarter.
The Paris-based IEA, which advises major economies, forecasts global oil consumption will grow by 1.1 million barrels a day in 2025, or about 1%. However, it projects that supplies outside OPEC+ will increase by roughly 36% more, driven by the US, Brazil, Canada, and Guyana.
The OPEC+ delay “has materially reduced the potential supply overhang that was set to emerge next year,” the agency said. Nonetheless, “robust supply growth from non-OPEC+ countries and relatively modest global oil demand growth leaves the market looking comfortably supplied.”
Crude prices have dropped about 16% since early July, trading near $74 a barrel in London. Traders are overlooking the conflict in the Middle East and instead focusing on weakening economic activity in China, which has been the primary driver of oil consumption for the past two decades.
For months, OPEC and its partners have been working to restore production halted in recent years, but worsening market conditions have hampered their efforts. The alliance has also struggled to enforce compliance with production limits.
In November, members exceeded their quotas by 680,000 barrels a day, driven primarily by the United Arab Emirates, Iraq, and Russia, according to the IEA.
OPEC’s secretariat in Vienna has scaled back its previously strong bullish forecasts, aligning more closely with the IEA’s more cautious outlook in recent months.
