5 days ago
World faces record glut of oil next year as Opec floods markets
The world faces a record glut of oil next year as a Saudi-led cartel ramps up production – just as global demand slumps.
On Wednesday, the International Energy Agency (IEA) said oil markets looked 'ever more bloated' as supply 'far eclipses' demand, with the Opec+ cartel of oil-producing countries – led by Saudi Arabia – ramping up production.
Slashing its forecast for orders growth, the IEA predicted demand for an extra 680,000 barrels a day in 2025 – the lowest rate since the aftermath of the global financial crisis in 2009, barring the pandemic.
The sluggish demand clashes with a surge of production from Opec. The IEA said Opec's push to boost global oil supply would mean an extra 2.5 million barrels per day this year and 1.9 million barrels a day in 2026 – around 400,000 to 600,000 barrels higher than it previously expected.
Weaker-than-expected demand in China, India and Brazil in recent months is expected to weigh the most on global orders. The IEA said demand growth would hit 700,000 barrels a day in 2026 – down from estimates of 720,000 last month.
'The latest data show lacklustre demand across the major economies and, with consumer confidence still depressed, a sharp rebound appears remote,' the IEA said.
'Consumption in emerging and developing economies has been weaker than expected, with China, Brazil, Egypt and India all revised down compared with last month's report.'
Ole Hansen, an analyst at Saxo Bank, said the IEA's estimates meant a 'record supply glut next year with oil inventories accumulating at a rate of 2.96 million barrels per day, surpassing even the average build-up during the pandemic year of 2020'.
The price of Brent crude oil, the international benchmark, fell as much as 0.9pc on Wednesday to below $66 per barrel.
Prices have fallen about 10pc so far this year, having peaked at more than $82 a barrel in January before Donald Trump's tariff campaign raised concerns about global economic growth – and thus demand for oil.
Keshav Lohiya, from consultant Oilytics, said traders were also looking ahead to the US president's meeting with Vladimir Putin in Alaska on Friday, which could send oil prices even lower if the meeting appears to herald an end to the war in Ukraine.
He said: 'Markets continue to remain in a wait-and-see approach as we await the big Trump-Putin meeting in Alaska.'
Kathleen Brooks, an analyst at XTB, added: 'The peak of the supply glut will be at the end of 2026, according to the IEA, which could keep a lid on the oil price for the long term.'
