The International Energy Agency (IEA) may have been overly cautious in its latest oil market assessments, which project a significant surplus for 2025. Analysts suggest that actual supply-demand trends paint a more optimistic picture.
Inventory Trends Challenge Pessimistic Projections
Recent global oil inventory data contradicts the IEA’s bearish outlook. In its November oil market report, the agency noted sharp stock drawdowns in the third quarter, with withdrawals exceeding earlier forecasts. These larger-than-expected reductions have created a significant discrepancy in the agency’s calculations, often referred to as “unaccounted for” or “missing barrels.”
Analysts believe this gap could lead the IEA to adjust its demand forecasts upwards. Giovanni Staunovo, a commodity analyst at UBS Group, predicts a less pessimistic outlook in future IEA reports.
The IEA’s 2025 Forecasts
In its most recent monthly Oil Market Report, the IEA warned of a potential surplus in 2025, with global oil supply expected to outpace demand by more than 1 million barrels per day (bpd). Factors such as sluggish Chinese demand, Libya’s return to full-capacity production, and the anticipated easing of OPEC+ production cuts were cited as contributing factors.
However, the reality appears more complex. The IEA reported a steep drop in global oil inventories, with September stock levels plunging by 47.5 million barrels to their lowest since January. OECD industry stocks fell by 36.4 million barrels to 2.8 billion, a level significantly below the five-year average.
Preliminary data also indicates that global oil inventories declined for the fifth consecutive month in October. For the third quarter, the IEA observed a drawdown rate of 1.16 million bpd, far exceeding its earlier projection of just 380,000 bpd.
Explaining the Discrepancy
The agency attributes this mismatch to incomplete or unreliable data from certain countries. Nonetheless, the significant gap suggests the need for a reassessment of global demand trends.
The IEA’s cautious projections stand in contrast to other forecasters. The U.S. Energy Information Administration (EIA) estimated a third-quarter drawdown of 900,000 bpd, marking the largest reduction since late 2021 when post-pandemic demand surged.
Revising the Outlook
To address the disparity, the IEA may revise its demand estimates, aligning its forecasts with observed trends. Historical adjustments are a routine part of forecasting as agencies refine their models to reflect actual data.
Despite the larger-than-expected inventory drawdowns, the IEA maintains that global supply growth remains robust. Non-OPEC+ production, led by the United States, Canada, Guyana, and Argentina, is expected to rise by 1.5 million bpd in both 2024 and 2025.
Even with current OPEC+ cuts in place, the IEA predicts global supply will exceed demand next year. However, the steeper-than-expected stock declines suggest that the anticipated surplus may be significantly smaller than initially feared.
This evolving dynamic underscores the complexity of accurately forecasting global oil markets, where shifting demand, geopolitical developments, and supply trends continually reshape the landscape.
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