Global oil supply growth is expected to materially exceed demand growth this year despite the tight market balance in the peak summer consumption season, the International Energy Agency (IEA) said in its monthly report on Friday.
Following OPEC+’s supersized production hike for August, the IEA revised up its estimate of global oil supply growth to 2.1 million barrels per day (bpd) for 2025 in its Oil Market Report for July, up by 300,000 bpd from last month’s projection of 1.8 million bpd growth.
At the same time, global oil demand is expected to increase by less than 1 million bpd in 2025, according to the agency, which cut its demand growth projection by 20,000 bpd compared to the June report.
World oil demand growth is forecast to rise by just 700,000 bpd in 2025, its lowest rate since 2009, with the exception of the 2020 Covid year, according to the agency.
But the market glut has not materialized yet, the IEA says, as it sees increasing demand in the summer that is tightening the market.
“Price indicators also point to a tighter physical oil market than suggested by the hefty surplus in our balances,” the agency said in the report.
“Prompt time spreads are in steep backwardation and refinery margins remain healthy despite implied stock builds of 1.74 mb/d in 2Q25.”
Last weekend, the OPEC+ producers surprised market analysts again with the size of the increase for August, which was bigger than expected – at 548,000 bpd versus 411,000 bpd expected.
OPEC+ continues to rely on strong summer oil demand to absorb the additional barrels. The physical market appears to be tight in the near term, although the coming glut in the autumn and beyond is likely to push oil prices down from current levels.
Oil prices didn’t collapse following last weekend’s OPEC+ decision—a sign that there isn’t immediate fear of oversupply and that the market hasn’t shaken off entirely geopolitics-driven volatility.
By Tsvetana Paraskova for Oilprice.com
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