The International Energy Agency (IEA) has recently reported that global oil markets are facing a surplus of more than 1 million barrels a day next year due to faltering Chinese demand. This surplus is expected to offset any turmoil in the Middle East and other regions, helping to stabilize oil prices.
China, known as the powerhouse of world markets, has seen a contraction in oil consumption for six consecutive months, with growth this year expected to be only 10% of the rate seen in 2023. The decline in Chinese demand has been attributed to various factors such as a slowdown in the construction sector, a shift to electric vehicles, high-speed rail, and gas in trucking.
Despite ongoing hostilities between Israel and Iran, crude prices have decreased by 11% since early October as traders focus on growing output in the Americas. This trend is expected to lead to a well-supplied market in 2025, with Brent futures trading near $72 a barrel.
Global oil consumption is projected to increase by 920,000 barrels a day this year and a further 990,000 barrels a day next year. The IEA attributes this slower growth to below-par global economic conditions post-pandemic, as well as the rapid deployment of clean energy technologies displacing oil in transport and power generation.
While demand growth cools, supplies from countries like the US, Brazil, Canada, and Guyana are expected to increase by 1.5 million barrels a day this year and next. This increase in supply is anticipated to create a surplus of more than 1 million barrels a day in 2025, even if the OPEC+ cartel abandons plans to restore output.
The OPEC+ alliance has been cautious in restarting production due to the fragile market conditions, with plans for modest monthly increases to be reviewed in December. Despite OPEC’s projections of higher growth, the IEA remains conservative in its outlook for future oil demand and supply dynamics.
As experts in the field of finance and investment, Extreme Investor Network recognizes the importance of staying informed about global oil market trends and their potential impact on investment decisions. Stay tuned for more updates and analysis on the latest developments in the energy sector.