An oil pump jack in Nolan, Texas. Oil prices have risen in recent weeks due to investor concerns over a potential Israeli response to a missile attack from Iran. — AFP file
The global oil market is expected to face a significant surplus in the coming year, according to the International Energy Agency (IEA), which on Tuesday reduced its 2024 demand growth forecast by 40,000 barrels per day and increased its projection for 2025 by 50,000 bpd. The IEA, which oversees industrialized countries' emergency oil reserves, assured markets that it is prepared to intervene if necessary to address any supply disruptions from Iran.
The IEA's downward adjustment of oil demand for 2024 follows a similar move by OPEC, which on Monday revised its forecast for global oil demand growth in 2024 downward, marking the producer group's third consecutive revision. This weaker outlook underscores the challenge faced by OPEC+, which plans to increase production in December after previously delaying the hike amid falling prices.
Oil prices have surged in recent weeks as investors worry that Israel might retaliate against a missile attack from Iran, a major oil exporter and OPEC member, by targeting its oil facilities or nuclear sites. The Paris-based IEA noted that public stocks exceed 1.2 billion barrels, and spare capacity within OPEC+ is at historic highs. OPEC+ includes the Organization of the Petroleum Exporting Countries and allies like Russia.
The IEA stated in its monthly report on Tuesday, "As supply developments unfold, the IEA stands ready to act if necessary." For now, supply continues to flow, and in the absence of a major disruption, the market is poised for a sizeable surplus in the new year. Oil prices fell more than 4.0% to around $74 per barrel on Tuesday, influenced by the weaker demand outlook and a media report suggesting Israel might avoid striking Iranian oil targets.
According to the IEA, global oil demand will increase by 860,000 barrels per day this year, down 40,000 bpd from the previous forecast. For 2025, it forecasts an expansion of 1.0 million bpd, about 50,000 bpd higher than anticipated last month. The IEA also expects demand from China, a long-time driver of global oil consumption growth, to rise by 150,000 bpd in 2024, down 30,000 bpd from the previous forecast. Consumption dropped by 500,000 bpd in August compared to the same month last year, marking the fourth consecutive month of declines.
The IEA emphasized, "Heightened oil supply security concerns are set against a backdrop of a global market that – as we have been highlighting for some time – looks adequately supplied."
