Oil Market Faces Oversupply Amid Sluggish Demand Growth

LONDON, Nov 13 (Reuters) – The global oil market is poised for a significant surplus next year, with forecasts indicating an oversupply of up to 4.09 million barrels per day as both OPEC+ and non-OPEC producers increase output amid modest demand growth, according to the International Energy Agency (IEA).

The IEA’s latest report reveals that this potential surplus could account for almost 4% of world demand, intensifying concerns surrounding oil prices. The agency noted, “Global oil market balances are looking increasingly lopsided, as world oil supply is forging ahead while oil demand growth remains modest by historical standards.” This prediction aligns with a trend witnessed over the last several months.

OPEC+ has been ramping up production since April, while other oil-producing countries such as the U.S. and Brazil are also contributing to increased supply. Following the IEA report, oil prices saw a slight rebound, rising to approximately $63 a barrel after a significant drop of 2% the previous day.

According to the IEA, global oil supply is expected to rise by about 3.1 million barrels per day in 2025 and an additional 2.5 million barrels per day next year. This growth is attributed to increased production from both OPEC+ and non-OPEC countries, overcoming a surge in demand driven primarily by the petrochemical sector.

Saudi Arabia stands out as a key contributor to this supply increase, having raised its output by 1.5 million barrels per day from January to October. In sharp contrast, Russian production has only grown by 120,000 barrels per day during this same timeframe, constrained by international sanctions and operational challenges.

Despite sanctions from the U.S. and the U.K. targeting major Russian oil producers like Rosneft and Lukoil, Russian oil exports have continued largely uninterrupted. The IEA highlighted a growing adaptation strategy employed by Russian companies to navigate these sanctions.

The agency also reported a notable increase in global oil inventories, indicating a surge in oil on water storage. This increase, which rose to just under 8 billion barrels, is largely driven by a rise in waterborne oil stocks, further affecting market dynamics.

As the oil market braces for these developments, the interplay between supply increases and demand stagnation will be critical in shaping future oil prices and market stability.