Each new report published by the International Energy Agency (IEA) shows a bleaker outlook for oil bulls (those who bet on a rise in the price of crude oil). In the document for the month of December (it is published one a month), the IEA predicts that there will be more than one million barrels of crude oil left over each day in the first two quarters of the year. Several factors come together. On the one hand, demand has not yet taken off, while supply is in great health, especially outside of OPEC. But in addition, January is usually a fateful month for crude oil demand, which is why there will be a historic accumulation of inventories. On the other hand, it is expected that in the second part of 2025 the situation will balance somewhat more, but there will still be hundreds of thousands of barrels left over each day, according to the agency’s forecast. The clash between rising supply and falling demand will star in the first part of the year.
The first part of the year, the market will see a surge in oil that will coincide with falling demand: “Global oil demand usually reaches its lowest point of the season in the first quarter of the year, specifically in January. In nine of the fourteen calendar years between 2008 and 2023 (excluding the pandemic-affected period of 2020-2021), January was the month with the lowest oil consumption. This seasonal effect is particularly notable in relative terms, with an average monthly drop in consumption between December and January of 2.2 million barrels per day (mb/d), equivalent to 2.3%. This decrease represents by far the largest decline recorded in any month. “February then shows the largest monthly increase, as oil use picks up after the holidays,” says the IEA report.
This pattern of the fall in oil demand in January is remarkably broad, both between countries and between the northern and southern hemispheres, although it is more pronounced in developed countries (-3% in the OECD compared to -1.6% in non-OECD countries). In fact, the largest drop is recorded in Latin America (-4.6%), suggesting that winter conditions are not a significant determining factor.
A year with oil everywhere
All in all, the IEA estimates that the average excess oil production in 2025 will be 950,000 barrels per day (in the first quarter there will be more than one million barrels each day, which will be slightly offset in the final part of the year) and could be even greater if OPEC (Organization of Petroleum Exporting Countries) and its partners decided to end their voluntary cuts program, warn the organization belonging to the OECD.
In its monthly report on the oil market published this Thursday, the IEA revises slightly downwards, by 80,000 barrels per dayits November forecasts for global demand for this year, mainly due to weaker-than-expected consumption in China, but also in Saudi Arabia and Indonesia.
In the third quarter, the year-on-year increase in demand was 320,000 barrels per day, the lowest since the shock of the covid crisis in 2020. It is true that, at the same time, oil consumption in developed OECD countries increased by 190,000 barrels in that third quarter when compared to the same quarter in 2023.
With its new projections, the world will absorb 102.8 million barrels per day on average in 2024, which means an increase of 840,000 barrels compared to 2023. That progression will accelerate only “modestly” in 2025, with an increase of 1.1 million barrels per day to 103.9 million, which also includes a slight upward revision of 90,000 barrels per day compared to last month’s IEA report. .
The petrochemical industry pulls the wagon
The main vector of this growth in demand will be the petrochemical industry, since changes in consumer behavior and new technologies, that is, essentially electrification, will continue to weigh on transportation. On the demand side, the most recent change is the decision by OPEC+ last week to postpone the end of its production cut of 2.2 million barrels per day at the earliest until a period that could go from the end of March 2025 to September 2026.
On that basis, the IEA has chosen to exclude in its forecasts that this crude oil will return to the market until the calendar is confirmed, and Even so, the surplus production is those 950,000 barrels per day in 2025. If OPEC+ decided to end these voluntary cuts from the end of next March, this surplus would rise to 1.4 million barrels per day.
The reason is that the authors of the report anticipate an increase in oil production of 630,000 barrels this year to 102.9 million, and of 1.9 million in 2025 to 104.8 million. 70% of the increase expected next year will come from countries that do not belong to the OPEC+ bloc, and in fact almost exclusively from the American continent. Specifically, the United States, Brazil, Canada, Guyana and Argentina will contribute more than 1.1 million additional crude oil and liquefied natural gas (LNG).
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