Oil Market Unfazed by 2025 Supply Concerns: Here's Why

Oil prices have been relatively stable in recent months, with benchmark crude futures trading in a narrow range of around $73 per barrel for ICE Brent. The market has been largely unaffected by concerns about potential supply overhangs in 2025, thanks to several factors that have contributed to a more comfortable supply outlook. Here's why the oil market is not 'concerned' with supply in 2025.

1. Delayed OPEC+ Production Cuts: In November 2023, the OPEC+ group decided to delay the unwinding of its additional voluntary production cuts by another three months and extend the ramp-up period by nine months through September 2026. This decision has materially reduced the potential supply overhang that was set to emerge next year (IEA, 2024). Even with this delay, the market is expected to be comfortably supplied in 2025 due to persistent overproduction from some OPEC+ members, robust supply growth from non-OPEC+ countries, and relatively modest global oil demand growth.
2. Strong Non-OPEC+ Supply Growth: Non-OPEC+ supply is expected to rise by about 1.5 million barrels per day (mb/d) in both 2024 and 2025, led by the United States, Brazil, Canada, Guyana, and Argentina (IEA, 2024). This growth is primarily driven by these countries, which are expected to add more than 1.1 mb/d of crude oil and natural gas liquids (NGLs) output between them. This robust supply growth from non-OPEC+ countries helps to offset potential supply overhangs and ensures a comfortable supply situation in 2025.
3. Modest Global Oil Demand Growth: Global oil demand is set to grow by 1.1 mb/d in 2025, lifting consumption to 103.9 mb/d (IEA, 2024). While this growth is relatively modest compared to the post-pandemic period, it is still sufficient to absorb the increased supply from both OPEC+ and non-OPEC+ countries. The increases in both years will be dominated by petrochemical feedstocks, while demand for transport fuels will continue to be constrained by behavioral and technological progress.
4. Comfortable Inventories: Global observed oil inventories drew by 39.3 million barrels (mb) in October 2024, led by an exceptionally sharp decline in oil products (-82.3 mb) as low refinery activity coincided with a rise in global oil demand (IEA, 2024). OECD industry stocks declined by 30.9 mb to 2,778 mb, 91.6 mb below the five-year average. Preliminary data for November show global inventories rebounded, led by oil on water and non-OECD crude oil. These inventory levels indicate a well-supplied market, further alleviating concerns about supply in 2025.
5. Geopolitical Tensions and Supply Disruptions: Geopolitical tensions and potential supply disruptions have not significantly impacted the market's outlook on oil supply in 2025. The market is closely assessing ongoing geopolitical tensions and evolving OPEC+ supply dynamics, with the bigger question for 2025 being global oil demand (IEA, 2024). While geopolitical hotspots and supply disruptions can lead to price volatility, the overall supply-demand balance in 2025 is expected to remain comfortable.

In conclusion, the oil market is not 'concerned' with supply in 2025 due to several factors, including the delayed OPEC+ production cuts, strong non-OPEC+ supply growth, modest global oil demand growth, comfortable inventories, and the market's ability to navigate geopolitical tensions and supply disruptions. These factors contribute to a more balanced oil market in 2025, with a comfortable supply outlook and relatively stable prices.