Global oil supply is expected to outpace demand this year and next, the International Energy Agency (IEA) has warned. In its latest Oil Market Report, the IEA forecasts a growing surplus of oil due to rising production from OPEC+, non-OPEC producers, and slower growth in consumption.
Key Forecasts & Data
- The IEA predicts that global oil supply will increase by 2.7 million barrels per day (bpd) in 2025, and by 2.1 million bpd in 2026.
- In contrast, demand growth is expected to be much more modest: approximately 740,000 bpd in 2025, and only slightly higher in 2026.
- Oil inventories are already rising. In July alone, global stocks grew by 26.5 million barrels, pushing year-to-date build-ups higher by over 187 million barrels.
- The supply boost comes from both OPEC+ gradually unwinding its earlier production cuts and stronger output from non-OPEC countries such as the U.S., Brazil, Canada, Guyana, and others.
Drivers of the Surplus
- OPEC+ production increases: Several member nations are reversing voluntary production cuts, adding more oil into global markets.
- Non-OPEC+ growth: Countries outside OPEC are also ramping up output, contributing significantly to the rising supply.
- China’s stockpiling: China continues importing more crude than it processes, leading to accumulation of reserves, which helps absorb some of the surplus.
Risks & Market Impacts
- The excess supply could put downward pressure on oil prices. Already, benchmark crude such as Brent has shown signs of softening amid concerns of oversupply.
- Producers with higher production costs may face pressure if prices drop significantly.
- Inventories in many regions are nearing levels that the IEA called “untenable” if the surplus continues unabated.
What Could Change the Balance
- Geopolitical developments new sanctions on major producers, or disruptions in supply routes—could tighten supply unexpectedly.
- Demand growth could accelerate if global economic conditions improve, especially in emerging markets.
- Refinery capacity, maintenance schedules, and seasonal factors (like lower processing during certain periods) can affect how much crude actually gets refined into usable products.
Why This Matters
- For consumers, surplus supply could translate into lower fuel prices or more stable energy costs.
- For oil exporting countries, revenue may suffer, especially if current price levels fail to cover the cost of production.
- For energy policy and climate goals, artificially cheap oil may discourage investment in renewables and energy transition.
