Global oil markets are headed toward a significant surplus in 2025, according to the International Energy Agency (IEA). The forecast, which emerged as part of the IEA’s latest oil market report, highlights the combination of weak demand growth and ample supply as key factors shaping the oil landscape in the coming year.
Oil demand growth is expected to slow considerably in 2025, with global consumption rising by only about 1 million barrels per day (mb/d), compared to nearly double that in 2023. This is mainly due to lackluster demand from major consumers like China, where oil consumption has been declining, adding pressure to an already softening market. The IEA’s predictions also reflect the subdued expectations for demand in the aviation sector, despite signs of recovery in some parts of the world.
Meanwhile, oil supply is on course to exceed demand growth, with non-OPEC countries, particularly in the Americas, poised to make substantial gains. The United States, Brazil, and Canada are expected to be key drivers of supply, contributing over 1 mb/d each in 2024 and 2025. This surge in output, coupled with spare capacity in OPEC+ countries, including major producers like Saudi Arabia and Russia, further amplifies the outlook for surplus production.
The IEA also flagged concerns over global refining margins, which have been under pressure due to weaker demand for refined products such as gasoline and diesel. This trend has led to a reduction in crude oil processing rates, adding to the surplus in the market. Refining activity could continue to struggle unless global demand rebounds, a scenario that seems unlikely under current economic conditions.
As the surplus looms, global oil inventories are being closely monitored. Although crude stock levels have dropped recently, they remain at relatively high levels compared to historical averages. Refined product stocks, on the other hand, have increased, further tightening margins for refineries globally. This situation points to an oversupplied market, especially if demand growth fails to meet expectations.
Despite these market dynamics, geopolitical tensions in oil-producing regions like the Middle East have continued to influence market volatility. However, unless significant disruptions occur, such as a major escalation of conflicts or natural disasters, the IEA anticipates that oil prices will remain under pressure in 2025. Although prices briefly spiked earlier in the year due to fears of supply disruptions, these fears have subsided, leaving the market in a precarious position.
