By The oil market remains adequately supplied against a backdrop of heightened tensions in the Middle East, the International Energy Agency said on Tuesday.
“For now, supply keeps flowing, and in the absence of a major disruption, the market is faced with a sizeable surplus in the new year,” the Paris-based energy agency said in its monthly oil market report.
The energy watchdog also said that if necessary, IEA could release crude oil from its public stocks, which hold about 1.2 billion barrels of crude oil, with half a billion barrels held under industry obligations.
Oil prices had surged by more than 10% in the last couple of weeks after Iran fired ballistic missiles towards Israel on October 1.
Brent prices had breached $80 per barrel in the next few sessions but had since then fallen back to $74-per-barrel level as the market awaits Israel’s response to the attack.
At the time of writing, Brent crude was at $74.30 a barrel, down more than 4% from the previous close.
Poor demand forecasts
The IEA said oil demand is expected to grow by just under 900,000 barrels per day in 2024 and by around 1 million barrels per day in 2025.
This is significantly below 2023’s growth of 2.0 million barrels per day.
Meanwhile, OPEC also cut its forecasts for growth in global oil demand on Monday.
However, the cartel still expects demand growth at 1.9 million barrels per day in 2024, sharply higher than IEA’s estimates.
For 2025, OPEC expects oil demand to grow by 1.6 million barrels per day, around 600,000 barrels per day higher than IEA’s latest estimates.
The IEA said China’s oil demand is especially weak, with consumption dropping by 500,000 barrels per day in August, its fourth consecutive month of declines.
IEA said:
At the same time, non-OPEC+ oil supply, led by the Americas, continues to make robust gains of around 1.5 mb/d (million barrels per day) this year and next.
Additionally, IEA said China would account for 20% of growth in global oil consumption in 2024 compared with almost 70% last year.
Adequate supply going into 2025
IEA believes the oil market is facing a surplus next year.
This year, supply from countries outside the Organization of the Petroleum Exporting Countries and allies is expected to increase by 1.5 million barrels per day both in 2024 and 2025.
The Americas are expected to account for 80% of gains in oil supply growth, the IEA said in its report.
IEA said:
The United States, Brazil, Guyana and Canada are set to account for most of the increase, boosting output by over 1 mb/d both years, which will more than cover expected demand growth.
At the same time, Libyan oil exports have resumed, following the hard-won agreement that resolved the political dispute that had disrupted oil exports, according to the report.
Moreover, the OPEC+ alliance is sitting on a massive spare production capacity of oil. “Excluding Libya, Iran and Russia, effective spare capacity comfortably exceeded 5 mb/d in September,” IEA said.
“Global oil stocks provide a further buffer, even as observed crude oil inventories drew by 135 mb over the past four months to their lowest since at least 2017 and OECD industry stocks remain well below their five-year average,” the agency added.
However, the agency said that the global refined petroleum product stocks have swelled to three-year highs, pressuring margins across key refining hubs.
Refining margins and global inventories
Refining margins declined further in September as petrol, diesel, and jet fuel cracks deteriorated.
As a result, IEA said that global refinery runs of crude oil is expected to be at 82.8 million barrels per day in 2024, down by 180,000 barrels per day from the previous forecast.
For the year as a whole, refinery runs are expected to grow by just 540,000 barrels a day.
Next year, refinery runs are expected at 83.4 million barrels per day, down 210,000 barrels a day from the previous forecast.
In terms of inventories, global stockpiles fell by 22.3 million barrels in August, led by a 16.5 million barrels draw in crude oil stocks, the IEA said.
“Preliminary data suggest oil stocks fell further in September. Relatively robust refining activity and OPEC+ supply cuts have underpinned a 135 mb draw in crude stocks since May, while product stocks built by 35 mb over the same period,” the agency said.
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