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Global Oil Market Faces Significant Oversupply in 2025, Warns IEA
The International Energy Agency (IEA) has projected a substantial surplus in the global oil market for 2025, estimating an excess supply of up to 4.09 million barrels per day (bpd). This anticipated oversupply stems from increased production by OPEC+ members and other key producers, coupled with a slowdown in demand growth.
Supply Outpaces Demand Amid Rising Production
According to the IEA’s latest monthly report, the oil market is becoming increasingly imbalanced. While global oil output continues to accelerate, demand growth remains relatively subdued compared to historical trends. The forecasted surplus of 4.09 million bpd represents nearly 4% of worldwide oil consumption, a figure notably higher than estimates from other market analysts.
Since April, OPEC+-the coalition of OPEC countries plus Russia and allied producers-has steadily increased its oil output. Meanwhile, non-OPEC producers such as the United States and Brazil are also expanding their supply, intensifying concerns about an oversupplied market and exerting downward pressure on prices.
Price Movements and Market Reactions
Following the IEA’s announcement, crude oil prices rebounded to approximately $63 per barrel, recovering some losses after a 2% decline the previous day. This price adjustment came after OPEC revised its 2026 outlook from a significant deficit to a modest surplus, signaling a shift in market expectations.
Forecasts for Supply and Demand in 2025 and Beyond
The IEA anticipates global oil production will increase by about 3.1 million bpd in 2025 and by another 2.5 million bpd in 2026, with each figure slightly higher than last month’s projections. Despite these supply gains, the agency has also raised its demand forecast for 2025 by 70,000 bpd to 770,000 bpd, driven primarily by growing consumption in the petrochemical sector.
However, the agency’s short-term outlook contrasts with its longer-term annual report released earlier, which suggests that global oil and gas demand could continue to rise until 2050, reflecting ongoing energy needs despite the global push for cleaner alternatives.
Discrepancies in Surplus Estimates
OPEC’s own data, as analyzed by Reuters, indicates a much smaller surplus of just 20,000 bpd for 2025, marking a significant downward revision from its earlier forecast of a large deficit. This divergence highlights the uncertainty and complexity in predicting future oil market dynamics.
Production Increases and Geopolitical Factors
Global oil output in October was 6.2 million bpd higher than at the start of the year, with production gains evenly split between OPEC+ and non-OPEC countries. Saudi Arabia, the largest OPEC producer, contributed an additional 1.5 million bpd, while Russia’s output rose by a modest 120,000 bpd amid ongoing sanctions and military disruptions in Ukraine.
Despite intensified U.S. sanctions targeting Russian oil giants Rosneft and Lukoil, Russian crude exports have largely persisted. The IEA notes that new entities such as MorExport, RusExport, and NNK-active since May-have taken over much of Russia’s export volume, collectively handling around 1 million bpd of crude and refined products as of October.
Rising Global Oil Inventories Signal Market Glut
The IEA also highlighted a significant build-up in global oil inventories, which reached nearly 8 billion barrels in September-the highest level since July 2021. This inventory growth was primarily driven by an 80 million barrel increase in waterborne oil storage, a trend that preliminary data suggests continued into October.
Such elevated stockpiles underscore the challenges facing the oil market as supply outstrips demand, potentially prolonging price volatility and market uncertainty.
