IEA Forecasts 2.1 Million Bpd Supply Growth in 2025 Despite 700,000 Bpd Demand Increase

The global oil market is experiencing a complex dynamic where supply growth is outpacing demand growth, yet market conditions remain tight due to strong summer demand. The International Energy Agency (IEA) has revised its forecast for global oil supply growth in 2025, projecting an increase of 2.1 million barrels per day (bpd), significantly outpacing the expected demand growth of 700,000 bpd. This revision comes after OPEC+ announced a substantial production hike for August, which exceeded market expectations. Despite this oversupply, the market remains tight due to strong summer demand, which is absorbing the additional barrels.

The IEA notes that price indicators, such as prompt time spreads and refinery margins, suggest a tighter physical oil market than the surplus in their balances would imply. This discrepancy is likely due to the robust summer demand, which is tightening the market in the near term. However, the IEA warns that a glut could materialize in the autumn and beyond, potentially pushing oil prices down from current levels. The resilience of oil prices following the OPEC+ decision indicates that the market has not entirely shaken off geopolitical volatility.

The IEA's revised forecast for 2025 demand growth is 720,000 bpd, while supply is expected to climb by 1.3 million bpd, signaling a potential oversupply in the coming years. The agency also notes that global oil demand growth is forecast to rise by just 700,000 bpd in 2025, its lowest rate since 2009, with the exception of the 2020 Covid year. The IEA's report highlights the complex dynamics of the global oil market, where supply growth outpaces demand growth, but market conditions remain tight due to strong summer demand.

The Northern Hemisphere has a higher use of oil, especially during summer travel, and the IEA expects refinery crude throughput to climb by almost 3.7 million barrels per day from May through August due to high demands by airlines and road trips. Along with that, crude burned in refineries to generate electricity, mainly to power air conditioners, will double to about 900,000 barrels a day. Despite the seasonal boost, this year’s projected demand gain of 700k barrels per day is the least after the 2020 pandemic slump since 2009. The IEA cautioned that it is still early to pin demand headwinds on American import tariffs, and the sharpest drops have appeared in Japan, the US, Mexico, South Korea, and China.

The agency’s demand forecasts sit at the low end of industry estimates, reflecting its belief in a faster shift toward cleaner energy compared to some peers. In contrast, OPEC expects global oil use to grow by about 1.3 million barrels per day in 2025, nearly double the IEA’s figure. Looking ahead to 2026, the IEA expects that demand will rise by 720,000 barrels per day to 20,000 barrels per day below its previous view, while supply will expand by almost 1.3 million barrels per day.