IEA expects comfortably supplied oil market in 2025 despite demand hike

The world oil market will be comfortably supplied in 2025, the International Energy Agency (IEA) said on Thursday, even after producer group OPEC+ extended oil supply cuts and a slightly higher than expected demand forecast.

The outlook from the IEA, which advises industrialised countries, points to continued headwinds for OPEC+, which comprises the Organization of the Petroleum Exporting Countries and allies such as Russia. It is seeking to begin reviving output in 2025 after years of cuts.

Oil demand growth has been weaker than expected this year in large part because of China. After driving rises in oil consumption for years, economic challenges and a shift towards electric vehicles are tempering oil growth prospects in the world’s second-largest consumer.

Still, the IEA increased its 2025 global oil demand growth forecast to 1.1 million bpd from 990,000 bpd last month, “largely in Asian countries due to the impact of China’s recent stimulus measures,” it said in its monthly oil market report.

China will adopt an “appropriately loose” monetary policy next year, the first easing of its stance in some 14 years, alongside a more proactive fiscal policy to spur economic growth, the Politburo was quoted as saying on Monday.

To support the market, OPEC+ last week pushed back the start of oil output rises by three months until April and extended the full unwinding of cuts by a year until the end of 2026 due to weak demand and booming production outside the group.

The IEA said, even excluding the return to higher output quotas, its current outlook points to a 950,000 barrels per day oil supply overhang next year. This would rise to 1.4 million bpd if OPEC goes ahead with its plan to start unwinding cuts from the end of next March, it said.

Forecasts on the strength of demand growth in 2024 vary, partly due to differences over demand from China and the pace of the world’s switch to cleaner fuels, and the IEA’s view is at the lower end of industry estimates.

In the report, the IEA trimmed its forecast of 2024 world demand growth to 840,000 bpd, down 80,000 bpd from last month.

OPEC, which is at the top end, on Wednesday cut its demand growth forecasts for this year and next, but still expects much more rapid growth than the IEA.

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