Javier Blas, a Bloomberg Opinion columnist, has projected that the oil market will face an oversupply by 2025, primarily due to the rollback of OPEC production cuts and increased supply from non-OPEC countries such as the U.S., Canada, and Guyana. Blas notes that while current oil prices imply weaker demand, global oil consumption is still growing by approximately 1 million barrels per day, even with the rise of electric vehicles and improved energy efficiency. However, he cautions that supply is set to outpace demand, potentially leading to lower oil prices in the near future.
Analysts at Wells Fargo share a similar outlook, predicting lower oil prices through 2025 due to the heightened risk of a global oversupply. They attribute this to the continued growth in U.S. shale production and slowing demand in key economies, particularly China. The anticipated relaxation of OPEC+ production cuts by the end of 2024 further supports their forecast of a supply surplus in 2025, despite current tightness in the market.
Wells Fargo estimates that global oil supply will rise from 102.8 million barrels per day (bpd) in 2024 to 104.8 million bpd in 2025, driven by increased output from non-OPEC producers like the U.S. and Brazil, along with OPEC’s planned production increases. The analysts liken the current situation to 1998, when oil prices plummeted due to a combination of economic slowdown and an influx of new supply. Although they don’t predict a full repeat of 1998, they acknowledge investor concerns over economic uncertainties in China and OPEC+’s intention to reverse production cuts.
While U.S. shale supply growth has been a major contributor to past global oversupply, its impact is expected to be limited this time. U.S. oil production increased by only 0.1 million bpd in the third quarter, significantly below the 0.6 million bpd average seen in previous growth years.
Wells Fargo also highlights that several factors could change the course of oil prices, including a quicker-than-anticipated recovery in global demand, particularly from China and OECD countries.
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