Worldwide Vitality Company (IEA) on Thursday projected that world crude oil provide could exceed demand by round 1 million barrels per day (mb/d) in 2025 as rising commerce tensions and OPEC+ winding down manufacturing cuts are fuelling uncertainty which is dampening oil demand progress.
“Dangers to the market outlook stay rife and uncertainties abound. Our present balances recommend world oil provide could exceed demand by round 600,000 b/d this yr. If OPEC+ extends the unwinding of output cuts past April with out reining in provide from members presently overproducing versus their targets, one other 400,000 b/d may very well be added to the market,” the IEA mentioned in its month-to-month oil market report for March 2025.
Equally, the scope and scale of tariffs stays unclear, and with commerce negotiations persevering with apace, it’s nonetheless too early to evaluate the influence in the marketplace outlook, it added.
As per the US Vitality Info Administration (EIA), Brent crude oil spot value averaged $75 per barrel in February, $4 a barrel decrease than in January and $8 decrease than on the identical time final yr.
Commerce tensions
The IEA report identified that benchmark crude oil costs fell in February and early March as issues mounted over outlook for the economic system and world oil demand progress amid escalating commerce tensions and as OPEC+ introduced it could begin unwinding manufacturing cuts in April.
Towards this backdrop, discussions began on the potential for an preliminary ceasefire and an eventual peace deal in Ukraine. ICE Brent futures declined by $11 per barrel over the previous eight weeks, buying and selling close to three-year lows round $70 on the time of writing, it added.
“The macroeconomic circumstances that underpin our oil demand projections deteriorated over the previous month as commerce tensions escalated between the US and several other different international locations. New US tariffs, mixed with escalating retaliatory measures, tilted macro dangers to the draw back,” IEA mentioned.
Current oil demand information have underwhelmed, and progress estimates for This autumn 2024 and Q1 2025 have been marginally downgraded to round 1.2 mb/d, with information for each superior and creating markets coming in under projections, it added.
Final week, the US EIA in an replace to its short-term market outlook mentioned, “The evolving tariff coverage has added uncertainty round expectations for world oil demand progress, issues about which had persistently weighed on oil costs during the last yr.”
On the availability aspect, any potential ceasefire within the Russia-Ukraine battle might add Russian oil volumes again into the market. Lastly, continued provide progress from producers exterior of the OPEC+ settlement, primarily in North and South America, provides further downward stress to US EIA’s value forecast in 2026.
Softening costs
US EIA anticipates that world oil inventories will start to construct in July-September quarter of 2025.
It expects that by the 2025-end rising oil provide will imply extra oil is being produced globally than is being consumed, resulting in stock accumulation and downward stress on costs by the rest of its forecast interval.
“Because of this, we forecast the Brent crude oil value will fall to $66 per barrel in December 2026, averaging $68 in 2026. Our 2026 Brent value forecast is $2 per barrel increased than we forecast final month, principally because of much less crude oil manufacturing from OPEC subsequent yr than we beforehand anticipated, which largely displays our expectation of much less crude oil manufacturing from Iran and Venezuela,” it added.
The IEA mentioned the US is presently producing at file highs and is forecast to be the biggest supply of crude oil provide progress in 2025, adopted by Canada, Brazil and Guyana.
Proposed US tariffs on Canada and Mexico, set to take impact on 1 April, could influence flows and costs from the 2 international locations that accounted for roughly 70 per cent of US crude oil imports final yr.
“In the meantime, the newest spherical of sanctions on Russia and Iran has but to considerably disrupt loadings, at the same time as some patrons have scaled again purchases,” IEA mentioned.
