The Oil Market Surplus May Be Smaller Than Feared
- For months, the IEA has struck a bearish tone and warned of a large surplus coming to the market in 2025.
- Global inventories have been drawing down at a much larger rate than the IEA has expected.
- The IEA may have to revise upwards its demand estimates and come up with a less bearish outlook for oil market balances for 2025.
Oil market forecasters such as the International Energy Agency (IEA) may have been too pessimistic about supply-demand balances in their latest assessments, which show a large surplus for 2025.
Actual global oil inventory trends in the third quarter look much more bullish than the IEA’s balances and projections, the agency’s latest oil market report showed.
Stock draws have accelerated in recent months, with withdrawals bigger than previously expected, leaving a large gap of “unaccounted for”, or “missing barrels” in the projections.
This wide gap between inventory levels and IEA forecasts could soon prompt the agency to revise up its demand forecasts, analysts say.
For months, the IEA has struck a bearish tone and warned of a large surplus coming to the market in 2025. Per the agency’s monthly Oil Market Report (OMR) from last week, global supply is set to exceed demand by more than 1 million barrels per day (bpd) next year.
Weak Chinese demand, the resumption of full-capacity oil production in Libya, and the planned unwinding of the OPEC+ production cuts are “all foreshadowing a well-supplied oil market in 2025,” the IEA said.
However, global inventories have been drawing down at a much larger rate than the IEA has expected.
The agency noted in its November report sharp inventory drawdowns in observed global oil stocks.
Global oil inventories plunged by 47.5 million barrels in September to their lowest level since January, led by a sharp draw in OECD oil products and non-OECD crude oil stocks, the IEA said. OECD industry stocks fell by 36.4 million barrels to 2.8 billion barrels, which was 95.3 million barrels below the five-year average. Provisional data suggest total global stocks decreased for a fifth consecutive month in October, according to the IEA. Read more