IEA lifts global oil supply forecast, signaling bigger surplus ahead
Giulia Petroni , The Wall Street Journal Global oil markets are poised for a larger surplus than previously expected this year, with supply set to grow more than three times faster than demand, the International Energy Agency said. The IEA raised its estimates for OPEC+ supply growth by 370,000 barrels a day for this year and by 520,000 barrels a day for the next, reflecting a faster-than-anticipated unwinding of voluntary cuts. (File Photo: Reuters) Gift this article
Global oil markets are poised for a larger surplus than previously expected this year, with supply set to grow more than three times faster than demand, the International Energy Agency said in its closely watched monthly report.
Global oil markets are poised for a larger surplus than previously expected this year, with supply set to grow more than three times faster than demand, the International Energy Agency said in its closely watched monthly report.
The Paris-based organization now forecasts oil supply growth of 2.5 million barrels a day this year and 1.9 million the next, from earlier estimates of 2.1 million and 1.3 million barrels a day, respectively. The revision follows OPEC+'s latest bumper output hike, though countries outside of the alliance remain the primary drivers of growth.
Supply was largely steady in July, as declines in OPEC+ output were offset by increased production from non-OPEC+ producers. Saudi Arabia's output fell from June's highs, when several Gulf producers boosted exports over fears of supply disruptions in the Strait of Hormuz.
The IEA raised its estimates for OPEC+ supply growth by 370,000 barrels a day for this year and by 520,000 barrels a day for the next, reflecting a faster-than-anticipated unwinding of voluntary cuts.
The alliance recently agreed to another super-sized hike for September in a push for market share, fueling concerns about a supply glut in the coming months. However, despite the unwinding of nearly 1.4 million barrels a day of cuts on paper from April to July, the IEA said only 640,000 barrels a day of additional crude production actually hit the market.
The supply growth forecast for non-OPEC+ producers was trimmed by 10,000 barrels a day to 1.3 million this year, but raised to 1 million barrels a day from 940,000 previously for next year, largely due to higher U.S. output.
Wednesday's report comes as Brent crude trades around $66 a barrel, while West Texas Intermediate is at $63 a barrel, as investors await President Trump's meeting with Russian President Vladimir Putin to discuss the war in Ukraine.
'Oil prices have been caught in the crosshairs of fast-changing market dynamics," the IEA said. 'While new sanctions on Russia and Iran threaten to impact trade flows, weaker economic growth is poised to temper demand."
Iranian oil supply rebounded from the low levels seen in June following the 12-day conflict with Israel, and U.S. pressure has yet to significantly dent exports, according to the agency.
Russian crude supplies remained broadly steady in July, though announced and threatened sanctions could curb output and revenue later this year. The IEA expects Russian production to align with its OPEC+ target, averaging just under 9.4 million barrels a day for the remainder of the year.
Meanwhile, global oil demand growth is expected to slow further, largely due to a weaker macroeconomic outlook. The slump is particularly evident in China, India, and Brazil, after June and July data came in weaker than expected, according to the agency.
'The latest data show lackluster demand across the major economies and, with consumer confidence still depressed, a sharp rebound appears remote," it said.
Demand is forecast to grow by 685,000 barrels a day this year and by 699,000 barrels a day the next, from previous estimates of 704,000 and 722,000 barrels a day, respectively. The IEA's projections are well below OPEC's.
Global oil inventories climbed for the fifth consecutive month in June, hitting a 46-month high of 7.8 million barrels. The increase was fueled by growing volumes of oil at sea, and rising stockpiles of both Chinese crude and U.S. gas liquids, the IEA said.
Write to Giulia Petroni at giulia.petroni@wsj.com Topics You May Be Interested In Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
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