World to face oil surplus in 2025

According to the International Energy Agency (IEA), Global oil supply will exceed demand in 2025 even if OPEC Plus cuts remain in place, as rising production from the United States and other outside producers outpaces sluggish demand.

The prospect of a more than one million barrels per day (bpd) excess supply - equal to over 1% of world output - is a headwind for OPEC Plus, which comprises the Organization of the Petroleum Exporting Countries and allies such as Russia - in its plan to start raising output

Oil demand growth has been weaker than expected this year in large part because of China. After driving rises in oil consumption for years, economic challenges and a shift towards electric vehicles are tempering oil growth prospects in the world's second largest consumer.

"China's marked slowdown has been the main drag on demand," the IEA said in its monthly oil market report.

"Rapid deployment of clean energy technologies is also increasingly displacing oil in transport and power generation, adding downward pressure to otherwise weak demand drivers," the report added.

The Paris-based agency left its 2025 oil demand growth forecast little changed at 990,000 bpd. At the same time, it expects non-OPEC Plus nations to boost supply by 1.5 million bpd, driven by the United States, Canada, Guyana and Argentina - more than the rate of demand growth.

Next year's surplus, as forecast by the IEA, could make it harder for OPEC Plus to bring back production. Earlier this month, OPEC plus again postponed a plan to start easing output cuts amid falling prices.

"Our current balances suggest that even if the OPEC Plus cuts remain in place, global supply exceeds demand by more than one million bpd next year," the IEA said.

Oil prices traded slightly weaker after the report was released, with Brent crude trading below US$73 a barrel.

 

 

 

 

 

International Energy Agency paints pessimistic outlook for crude oil

Oil prices climbed more than 2% on Friday, hitting the highest levels in more than a year on hopes that the US stimulus package will boost the economy and fuel demand, as supplies tighten due largely to output cuts by top producing countries.

Brent crude settled up at US$62.43/barrel by 1:32 1832 GMT, after rising to a session high of US$62.83, the highest since 22nd January 2020. The US benchmark WTI ended the session at $59.47 after rising to a session high of US$59.82, the highest since 9th January 2020.

While Brent rose 5.3%, WTI notched a weekly gain of about 4.7%. The rally was in anticipation of the US President Joe Biden meeting with a bipartisan group of mayors and governors as he keeps pushing for approval of a US$1.9 trillion coronavirus relief plan to bolster economic growth and help millions of unemployed workers.

Oil prices have risen in recent weeks due to production cuts from the Organization of the Petroleum Exporting Countries (OPEC) and allied producers in the group OPEC+.

Oil prices held onto their recent gains this week, buoyed by further signs that crude stocks, particularly in the US were falling.

Analysts anticipate that inventories will fall further later this year as transport fuel demand revives in tandem with the easing of virus-related restrictions on travel.

Still, OPEC this week ratcheted down expectations for global oil demand to recover in 2021, trimming its forecast to 5.79 million bpd.

The International Energy Agency (IEA) said oil supply was still outstripping global demand, though COVID-19 vaccines are expected to support a demand recovery.

The (IEA) report paints a more pessimistic picture than market participants have presumably been envisaging given the current high prices.

Demand data from the world’s biggest oil importer also paints a bleak picture.

The number of people who travelled in China ahead of Lunar New Year holidays plummeted by 70% from two years ago as coronavirus restrictions curbed the world’s largest annual domestic migration, official data showed.

The US drillers this week added oil and natural gas rigs for a 12th week in a row, the longest streak of additions since June 2017.

According to secondary sources, OPEC crude oil production averaged 25.50 million bpd in January 2021, up 180,000 bpd from December 2020, with output rising in top producer Saudi Arabia, as well as in Venezuela and Iran, which are exempt from the OPEC+ cuts.