Oil Edges Lower on 2025 Supply Surplus Forecast, But Set to Notch Weekly Gain

Oil prices have been on a rollercoaster ride this year, with analysts and investors alike trying to make sense of the volatile market. As we approach the end of 2024, one thing is clear: the global oil market is expected to face a significant surplus in 2025, despite OPEC+ production cuts. Let's dive into the details and explore what this means for investors.



According to the International Energy Agency (IEA), the global oil market will find itself in a large surplus next year, even with OPEC+ production cuts in place. The IEA estimates that supply will exceed demand by over 1 million barrels per day (bpd) in 2025, equal to over 1% of world output. This surplus is a headwind for OPEC+, which is planning to start raising output next year.

The main driver of this surplus is the strong supply growth from non-OPEC+ producers, led by the United States, Canada, Guyana, and Argentina. These countries are expected to boost supply by 1.5 million bpd in 2025, outpacing demand growth of 990,000 bpd. Meanwhile, oil demand growth has been weaker than expected this year, in large part due to China's economic challenges and the shift towards electric vehicles.

Despite the expected surplus, oil prices are still set to notch a weekly gain. As of now, Brent crude is trading below $73 a barrel, but it's important to note that the market is still waiting for OPEC+ decisions to gauge the extent of the 2025 surplus. The group has shown commitment to keeping the market in balance, but it remains to be seen whether they can continue to do so in the face of strong non-OPEC supply growth.

For investors, the key takeaway is that the oil market is expected to remain volatile in the coming months. While the surplus in 2025 may put downward pressure on prices, the market is still sensitive to geopolitical events and supply disruptions. As always, it's crucial to stay informed and make strategic decisions based on the latest data and analysis.

In conclusion, the global oil market is expected to face a significant surplus in 2025, driven by strong supply growth from non-OPEC+ producers. Despite this, oil prices are set to notch a weekly gain, and the market remains sensitive to geopolitical events and supply disruptions. Investors should stay informed and make strategic decisions based on the latest data and analysis.